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The emotional influences on vendors' residential price perception (The price virus)

Wong, Leon Kew (2016) The emotional influences on vendors' residential price perception (The price virus). Professional Doctorate thesis, Murdoch University.

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The aim of this study is to explore what causes the gap between the asking price and the buying price of houses in Australia. According to 2012 statistics provided by Real Estate Institute of Western Australia, home sales records shows approximately 70 per cent of the homes listed for sale did not achieve their asking price. The research hypothesis adopted in this thesis is that this gap is caused by vendors’ emotional attachment to the home, which in turn influences an unrealistic price. The proposal of this unrealistic price is the focus of the research investigation. The objective is to explore the hypothesis that home vendors are socially and emotionally conditioned to perceive their home to be worth more than its actual market value. The effect of irrational behaviour influenced by vendors’ emotions is deemed to be linked to their unrealistic perception of price.

Home ownership is a key sector of the property industry, now Australia’s biggest industry, larger even than mining. The industry contributed $185.5 billion to the economy, equivalent to 11.5 per cent of GDP in the last financial year. The latest data shows that Australian homes are currently worth $5.0 to $5.5 trillion dollars. Depending on the source, the estimate for number of residential properties sold each year in Australia is between 400,000 and 600,000. If indeed unrealistic price perception is influenced by human emotions in an industry as big as this, then there are cogent reasons for exploring this phenomenon.

This study employed a questionnaire survey relating to the research question. The survey was hosted on Fairfax Media’s websites and received responses from all over Australia as well as 11 other countries. The participants in the survey were mainly homeowners who had sold or had attempted to sell their homes, which enabled this study to explore the emotional behaviour underlying how homeowners arrive at a value for their homes.

Five emotions were assessed as key variables that affect price perception across the emotional stages in decision-making. The results suggests that the strongest factor influencing unrealistic price perception is greed, followed by vendors’ expectation that buyers will negotiate, a lack of trust in the real estate agent and pride in ownership. The findings reveal that the feeling of uniqueness of the home also influences this unrealistic price perception.

It is hoped that this study will contribute to the real estate industry by providing a better insight into why vendors tend to overprice their homes. The results of this research could therefore provide an improved understanding of home vendors’ behaviour, and offer an important insight into the implications of emotional attachment in relation to decision-making and the perceived value of the home.

Publication Type: Thesis (Professional Doctorate)
Murdoch Affiliation: School of Management and Governance
Supervisor: Gountas, John, Entrekin, Lanny and Gountas, Sandra
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