FUNDAMENTAL ASPECTS OF MARKET RESEARCH

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FUNDAMENTAL ASPECTS OF MARKET RESEARCH

• Main objectives of chapter
• To discuss types and levels of market
  research.
• To discuss the issues and scope of market
• research.
• To discuss research consulting in general.
• To discuss the research process.
• Expected learning results
• know the types and levels of market
  research
• can identify issues and scope of market
  research
• understand property market research
  consulting
• understand and apply the scientific method
  in a
• market research.

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Types of research
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Level of research
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Level of research Inferential analysis

• Sometimes called trend analysis.
• Uses secondary time series data and emphasises on
  the estimates of future changes in values by
  investigating past market trends.
• Identifies trends and patterns and infers
  expected market behaviour.
• Real estate analysts use statistics two draw
  inferences about a general class of phenomena,
  studying recent data to predict future events.
• Attempts a projection of historical trends
  focussing on macro data.

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Take-home exercise

• Study the rental trend of properties in your
  state since 1990. Use any forecasting methods to
  estimate the likely rental level in 2004.
• Apply your finding above to office in your
  locality. Comment on your findings.
• Submission next lecture

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Level of research Fundamental analysis

• Goes beyond trend analysis.
• Forecasting based on segmentation of broad
  demographic and economic data to reflect the
  subjects specific market.
• Principle real estate value is tied to the
  services the real estate provides.
• Uses micro data for a specific parcel of land and
  sub market
• Oriented toward future developments.
• E.g. to estimate the future capture rate of
  retail property
• identify the market/area of competition
• identify competing properties
• compare subject with competing properties
• estimate capture rate of competing
  properties
• estimate capture rate of subject property.

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Issues and scope of market research
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Direct Factors

• S f(expectation of demand planned supply
  competitive environment, and availability and
  cost of land, labour and capital)
• D f(population income employment relative
  prices taxes interest rate down payment
  requirements and future expectations)

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Indirect Factors

• STEP factors
• Topography and soil conditions,
• engineering,
• production process,
• zoning, utilities,
• transportation linkages,
• environmental impact,
• public facilities amenities,
• consumer behaviour,
• economic conditions,
• and government law and regulations.

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Scope of market research
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Data Synthesis and Recommendations
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Research Consulting Process

• Instructions to carry out a specific study
• Consulting proposal
• Contract signing
• Systematic procedure for study
• Communication and co-ordination of work
• Four stages of research consulting
• Developers goal and objectives
• Analysis of the general market conditions
• Market and/or feasibility study
• Project decision.
• Example

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Steps in Research
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STEPS IN THE SCIENTIFIC METHOD

• Three basic steps in property market research
•  
• ? Ascertaining market conditions
•   Information SS DD, prices and rentals,
  sales
• and leasing transactions, investment,
  competition,
• product innovation)
• Analyze markets and produce forecasts
•  ? Converting gut feelings into intelligent
  information through a scientific approach
• Drawing conclusions communicating the results

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Defining the research problem and objectives

•   A problem/decision needs information.
• Must know how to obtain the information.
• Avoid wrong information, incorrect
  interpretations, or information that costs too
  much.
• Advise how to define the problem and suggest
  ways to make better decisions.
• Identify the necessity of research (See Figure
  2.4).

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Defining Research Problem and Objectives (contd.)

• Do not too vague or too broad.
• E.g. Gather the data on the residential
  market", ? hundreds of things can be researched!
• What is specific decision facing the
  company?
• Best site for residential or commercial?
• How much demand from each alternative use?
• Should price be the sole factor?
• If not, what are other factors?
•  
• From the problem comes objectives.
• Govern the entire research process.
• Can be exploratory, descriptive, and causal.
• Put in writing to be certain about purpose and
  expected
• results.

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Deciding on Research Approach

• Primary versus secondary research
• Primary and secondary (already discussed).
• Primary original research, carried out for a new
  and specific purpose.
• Secondary existing research, useful to those who
  buy or read the published reports.
• Ad hoc versus continuous research
• Ad hoc once-only basis and is complete in
  itself. E.g. To evaluate the management quality
  of a shopping complex to find out what the
  tenants and shoppers say about facilities,
  security, rental level, business profitability,
  management-tenant relationship, etc.

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Deciding on research approach (contd.)

• Continuous conducted regularly, each
  succeeding report shows the movement of trends
  over time, about a particular variable. E.g.
  surveys on rental level, selling price, cost of
  material, sales turnover, and competitors'
  strategies can be conducted from time to time.
•  
• Quantitative versus qualitative
•  
• Quantitative total, percentage, mean, std.
  deviation, etc.
• Qualitative seeks information on reasons,
  perceived images or motives rather than numerical
  measurement of variables.

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Deciding on the Types of Research

• Some of types of market research
• A. Desk research
• B. Field research
• C. Observational research
• D. Survey research

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Developing a Research Plan

• A. Determining specific information
•  
• Decided based on research objectives.
• E.g. to investigate how the prospective buyers
  will react to a new housing product at a reduced
  price
• The demographic, economic, and lifestyle
  characteristics of current owners of similar
  housing products.
• The benchmark information of overpriced
  housing products.
• Affordability profile as reflected by the
  affordable average propensity to spend and the
  required average propensity to spend.
• The price bands and how they affect consumers'
  purchase decisions.
• Forecasts of sales of the product under study
  with the
• reduction in price.

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Developing a Research Plan (contd.)

• B. Survey of information
•  
• Secondary or primary.
• Starts by gathering secondary data, internally or
  externally.
• Help define the problem and research objectives.
• Cheaper and quicker.
• Problems unavailability, irrelevance,
  inaccuracy, non-currency, partiality of data.
• Thus, go for primary data!

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Developing a Research Plan (contd.)
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Developing a Research Plan (contd.)

• 2. Research instruments
•  
• Questionnaire.
• Questionnaire is difficult to design.
• Elicit relevant information to answer research
  questions.
• Needs to be developed, tested, and debugged for
  actual survey.
• A good research comes from a good questionnaire
  design.
• Needs proper sampling techniques.
•  
• Checklist.
• Contains elements/items of interest for which the
  subject perceives, pays attention or acts upon.
• Popular in observational research.
• E.g. visitors inspecting a model house What
  a visitor inspects? Why? How he/she evaluates
  things? What he/she finally does?

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Developing a Research Plan (contd.)

• Implementing data collection
• Most expensive and subject to error.
• Should monitor the fieldwork closely to
• make sure that plan is correctly
  implemented.
• guard against various survey problems
• (contacting respondents, respondents
  non
• cooperation, biased or dishonest
  answers,
• interviewers mistakes, etc.).
• Data must be processed and analysed.
• checked for accuracy and completeness.
• coded for computer analysis.
• apply computer programs to prepare
  statistics and
• advanced statistical and decision
  analyses.

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Developing a Research Plan (contd.)

• D. Presentation of results 
• Interpret the findings
• Draw conclusions about the implications
• Report them to management
• Useful tips
• Do not overwhelm managers with numbers
  and fancy
• statistical techniques
• Present major findings that are relevant
  to the major decisions
• research problem
• Interpretation should relate to problem
  situation
• Avoid bias
• Check whether
• the research project was properly carried
  out, all the necessary
• analyses were done, there area additional
  questions that could
• be answered using the data collected.
• Put up recommendations objectively.

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SUMMARY OF THE CHAPTER
? Real estate market research a systematic
design, collection, analysis, and reporting of
data and findings relevant to a specific
market situation facing a real estate
company. ? Market research can be specific or
general. ? Two levels of market analysis
inferential (trends and future forecasts) and
fundamental (specific site analysis). ?
Research consulting process developers goal
and objectives analysis of the general market
conditions market and feasibility study and
project decision.
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SUMMARY OF THE CHAPTER (contd.)

• Seven general steps in conducting any research
  defining the research problem and objectives
  deciding on research approach deciding on the
  types of research developing research plan
  implementing research plan presentation of
  results and disseminating information.
• Research results must be presented to companys
  management and results be interpreted correctly.
• Findings may be distributed internally for
  company use or published for wider access.

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• REFERENCES
• Abdul Hamid bin Hj. Mar Iman (2002). An
  Introduction to Property Marketing, Skudai
  Academic Publication Unit
• Barett, G.V. and Blair, J.P. (1982). How to
  Conduct and Analyse Real Estate Market and
  Feasibility Studies. Van Nostrand Reinhold
  Company.
• Fanning, S.F., Grissom, T.V., and Pearson, T.D.
  (1994). Market Analysis for Valuation Appraisals.
  Chicago, Illinois Appraisal Institute.
• Greer, G.E. and Farell, M.D. (1988). Investment
  Analysis for Real Estate Decisions, 2nd. ed.

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• Thank you!