UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business PHAN THANH SI KEY FACTORS AFFECTING HOUSE PURCHASE DECISION OF CUSTOMERS IN VIETNAM ID: 60340102 MASTER OF BUSINESS (Honours) SUPERVISOR: DINH THAI HOANG, Ph.D. Ho Chi Minh City - Year 2012 ii ACKNOWLEGEMENTS First of all, I would like to express my deep appreciation to my supervisor, Dr. Dinh Thai Hoang who instructed and helped me enthusiastically during period of the thesis. I also would like to thank you all my colleagues and friends of Hoa Binh Corporation and Sacomreal for their valuable contributions to give comments and suggestion to revise the questionnaire survey. I am grateful to the supervisory board for providing me with their available advices and patient supports when I need. I will never forget the friendly postgraduate students for helping me during studying and doing thesis. The most special thanks go to my parents, my brothers and sisters who always create the most convenient conditions for me as well as support me all time. iii ABSTRACT The main purpose of the study is to investigate the effecting of key factors on housing purchase decision of customers in Vietnam. First, a model which is proposed based on analyzing of previous literature. Then the model is tested on a pilot test which is conducted of a small real estate professional group and another group of 15 respondents, and on a larger survey of 263 samples. The study finds out a strong positive relationship between top two factors, including “living space”, “distance” and customers’ housing purchase decision. The three weaker positive relationship factors are “feature”, “finance” and “environment” to housing decision makers. It is also found that there is no difference in decision making of customers according to different demographics consisting of gender, age, marital status, monthly income and education level. Key works: real estate, purchase factors, Vietnam iv TABLE OF CONTENTS ACKNOWLEGEMENTS ii ABSTRACT iii LIST OF TABLES vii LIST OF FIGURES viii ABBREVATIONS viii CHAPTER 1. INTRODUCTION 1 1.1. BACKGROUND 1 1.2. RESEARCH PROBLEMS & RESEARCH QUESTIONS 1 1.3. RESEARCH PURPOSE 3 1.4. SCOPE OF THE RESEARCH 3 1.5. RESEARCH STRUCTURES 3 CHAPTER 2. LITERATURE REVIEW 4 2.1. LITERATURE REVIEW 4 2.1.1. Feature 4 2.1.2. Living space 4 2.1.3. Finance 5 2.1.4. Distance 5 2.1.5. Environment 5 2.1.6. Purchase decision 6 2.1.7. Demography 6 2.2. CONCEPTUAL FRAMEWORK 7 CHAPTER 3. RESEARCH METHODOLOGY 8 3.1. RESEARCH PROCESS 8 3.2. SAMPLE SIZE 11 3.3. MEASUREMENT SCALE 11 3.3.1. Measurement scale 11 3.3.2. Pilot test 11 3.4. MAIN SURVEY 15 v 3.5. DATA ANALYSIS METHOD 15 3.5.1. Reliability measure 15 3.5.2. Validity measure by EFA (Exploratory Factor Analysis) 16 3.5.3. Multiple regression analysis 16 CHAPTER 4. DATA ANALYSIS & RESULTS 18 4.1. PREPARATION DATA 18 4.1.1. Editing 18 4.1.2. Coding 18 4.2. DESCRIPTIVE DATA 21 4.3. ASSESSMENT MEASUREMENT SCALE 23 4.3.1. Cronbach’s Alpha 23 4.3.2. Exploratory Factor Analysis (EFA) 26 4.3.2.1. Assessment of data 26 4.3.2.2. Defining number of extracted factors 27 4.4. HYPOTHESES TESTING BY MULTIPLE REGRESSION 30 4.4.1. Checking assumption of Multiple Regression 30 4.4.1.1. Sample size 30 4.4.1.2. Assessment multicollinearity of independent variables 30 4.4.1.3. Normality, linearity, homoscedasticity & outliers 30 4.4.2. Evaluating the model 31 4.4.3. Evaluating the independent of variables 31 4.4.4. Checking hypotheses of model 32 4.4.5. Analysis effect of control variables by Multiple Regression 34 CHAPTER 5. CONCLUSIONS AND IMPLICATIONS 35 5.1. RESEARCH OVERVIEW 35 5.2. RESEACH FINDINGS 35 5.3. MANAGERIAL IMPLICATIONS 36 5.4. RESEARCH LIMITATIONS & DIRECTIONS FOR FUTURE RESEARCH 37 vi REFERENCES 38 Appendix 1: The first draft of the questionnaire 42 Appendix 2: The English questionnaire 45 Appendix 3: The Vietnamese questionnaire 49 vii LIST OF TABLES Table 3.1: Main factors affecting customers’ housing purchase decision 13 Table 4.1: Codebook of questionnaire items 18 Table 4.2: Characteristics of respondents 22 Table 4.3: Cronbach’s Alpha test results 25 Table 4.4: EFA results 28 Table 4.5: Correlations among variables 29 Table 4.6: Coefficient table of MLR 32 Table 4.7: Hypotheses results 33 Table 4.8: Descriptive statistics 54 Table 4.9: Cronbach’s Alpha with full items for each constructs 54 Table 4.10: KMO and Bartlett’s test 56 Table 4.11: Total variance explained 56 Table 4.12: Correlation among variables (Partial only) 57 Table 4.13: Factor Matrix 59 Table 4.14: Factor Correlation Matrix 60 Table 4.15: Model summary 60 Table 4.16: Anova 60 Table 4.17: Casewise diagnostics 60 Table 4.18: Residuals statistics 61 Table 4.19: Cofficients of MLR including Sex_Render 63 Table 4.20: Cofficients of MLR including Marital_Render 64 Table 4.21: Cofficients of MLR including Education_Render 64 Table 4.22: Cofficients of MLR including Age_Render 64 Table 4.23: Cofficients of MLR including Career_Render 65 Table 4.24: Cofficients of MLR including Income_Render 65 viii LIST OF FIGURES Figure 2.1: Conceptual framework 7 Figure 3.1: Research process 10 Figure 4.1: Scree plot 58 Figure 4.2: Regression standardized residual 62 Figure 4.3: Normal P-P plot 62 Figure 4.4: Scatterplot 63 ABBREVATIONS EFA : Exploratory Factor Analysis GSO : Vietnam Government Statistics Office HCMC : Ho Chi Minh City Mil. : Million MLR : Multiple Linear Regression UEH : University of Economic 1 CHAPTER 1. INTRODUCTION 1.1. BACKGROUND As universal population levels continue to rise, the housing shortage in many developing countries has reached critical levels (Morel, 2001, p. 1119). Real estate is one of the most important things to citizens, so “the house purchase decision of them can change their life” (Wells, 1993). The house purchase decisions are different from other business decisions due to “the innate, durable and long-term characteristics of real estate”. It is a highly differentiated product with “each specific site unique and fixed in location” (Kinnard, 1968). In Vietnam, it is known as the third largest population in South East Asia and ranked the 14 th largest in the world in terms of total population. Its population estimated of 89 million in 2010 (GSO, 2011). The annual average growth population of Vietnam from 2000 to 2010 was approximately 1.03 million people per year or 1.2% annual growth. Particularly, one of the top economic centers of Vietnam is Ho Chi Minh City which has around 7.2 million people as in April 2009, but its actual population is likely to be significantly higher because of unrecorded migration from rural areas. The real estate market in Vietnam has significantly changed during from the 1990s to now and it might be seen as three times fever and declining prices in the last 20 years. Up to the end of 2012, the large real estate outstanding loans and a big number of inventories created a serious crisis. However, according to the Deputy Minister of Construction Nguyen Tran Nam, he emphasized that “people’s housing demand is very large and solvency is high, but the real estate market lacked of information”. 1.2. RESEARCH PROBLEMS & RESEARCH QUESTIONS In general, the real estate in Vietnam has got many difficulties in making effort to satisfy customer demands. According to incomplete statistics of the Ministry of Construction surveyed in 44 provinces up to August 30 th , 2012, the country now 2 had 16,469 unsold apartments, in which HCMC was 10,108 unsold apartments and total number of inventories of low buildings was 4,116, in which HCMC was 1,131 ones (Anh, 2012). Therefore, the Prime Minister stressed that the solution to rescue real estate market should be included in the Resolution of the Government. The main reasons of the crisis were the real estate market supply did not meet customer demands, the investors lacked of exact information of customer and real estate market conditions. “There are two main fields of customer research are how customers go about making decisions and how decisions should be made. In addition, “creating true value for customer and customer notion focused approach” is confirmed (Edwards & Fasolo, 2001). It is found that “customer decision making is one of the most important areas of customer behavior and it requires gathering a lot of regarding information” (Bettman et al., 1998 & Simonson et al., 2001). There have been many published academic research about customer house purchase with variety of both developed and developing countries. However, “the national and cultural characteristics play a very significant role in house purchase decision, that mean finding which is applied in specific context may not extend to another context” (Opoku & Abdul-Muhmin, 2010). The real estate in Vietnam has got specific characteristics to which connected customer demands closely. In recent years, researchers, domestic and foreign companies attracted to real estate field in Vietnam with a number of research works. However, there has been not enough research into the way customers making decision to buy real estate as well as which major factors have got relationship with customer decision. Consequently, in the term of real estate purchase decision of customers, the research questions of the thesis are raised as two following questions: [...]...3  What are the key factors affecting the house purchase decision of customers in Vietnam?  How is impact of these factors on house purchase decision of customers evaluated in Vietnamese context? Understanding relationship between main factors affecting customer house purchase decision is an important role for both real estate developers and enterprises to satisfy customers demand and to... Abdul-Muhmin, 2010) As a result, H1 There is a positive impact of house features on customers house purchase decision 2.1.2 Living space Secondly, “private living space” is one of most important factors affecting to “consumer housing decision Living space consists of “size of living room”, “size of kitchen”, “quantity of bathrooms” and “quantity of bedrooms” (Opoku & AbdulMuhmin, 2010, p.219) In addition,... an important determinant of a household choice of residence (Quigley, as cited in Haddad, 2011, p 234) Also, it is confirmed that “feature” has significant effects on customers house purchase decision making (Sengul et al., 2010, p 214) The “feature” of house includes “design”, house size” and “quality of building” determinants relating to decision making to buy a house of an individual (Adair et... meaning of questionnaires quite well and knew the way to answer, so the 13 questionnaire was the last version to carry out in the massive areas After that, a main survey was conducted From above discussion above, a summary table of main factors affecting customer’ housing decision making is presented as following Table 3.1 No Factor Table 3.1: Main factors affecting customers housing purchase decision. .. and to have available strategies in the real estate field 1.3 RESEARCH PURPOSE Based on the research questions, the main purpose of this thesis is to identify what factors have impact on house purchase dicision of customers and examine how these factors influence their decision of buying house in Vietnam 1.4 SCOPE OF THE RESEARCH The research is conducted in Ho Chi Minh City with the respondents who... 7 Type of House Fea07 Kitchen Size Liv01 9 Quantity of Bedroom Liv02 10 Quantity of Bathroom Liv03 11 Living room size Liv04 12 Storey of House Liv05 House Price Fin01 Maximum mortgage Fin02 Maximum monthly Fin03 Private 8 Record numbers Living Space 13 Finance 14 15 Record numbers repayment 16 Interest rate Fin04 17 Income Fin05 18 Payment duration Fin06 19 The registration fee Fin07 Width of adjacent... p.306) group “interest rate”, “maximum mortgage”, “maximum monthly payment”, and “length of time payment” into “financial” factor Consequently, H3 There is a positive impact of financial status on customers house purchase decision 2.1.4 Distance Fourthly, one of the most important factors affecting individual decision making to buy a house is “location” factor (Kaynak & Stevenson, as cited in Sengul... presented in Appendix 01 For items of the house feature” factor, the item “type of finishing” and “quality of finishing” should be deleted because their content was inside the content of “construction quality” While all items of “private living size” factor were agreed, the item “tax” of “Finance” factor should be changed into “the registration fee” For “distance” factors, the house on a main bus route”... between five independent variables, including “feature”, “living space”, “finance”, “distance” and “environment” and one dependent variable, namely decision Moreover, defining whether there was any significant contributory of control variables consisting of “gender”, “age”, “marital”, “income”, “education” and “career” on customers housing purchase decision was also analyzed by the multiple linear regression... the “space customer” and customers purchase making process (Graaskamp, 1981) Accordingly, H2 There is a positive impact of living space on customers house purchase decision 5 2.1.3 Finance Thirdly, “financial” status is much significant to customer house choice (Hinkle and Combs, 1987, p.375; Kaynak & Stevenson, as cited in Sengul et al., 2010, p.220) The “financial” element of real estate requires . UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business PHAN THANH SI KEY FACTORS AFFECTING HOUSE PURCHASE DECISION OF CUSTOMERS IN VIETNAM . The main purpose of the study is to investigate the effecting of key factors on housing purchase decision of customers in Vietnam. First, a model which is proposed based on analyzing of previous. on house purchase dicision of customers and examine how these factors influence their decision of buying house in Vietnam. 1.4. SCOPE OF THE RESEARCH The research is conducted in Ho Chi Minh