UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Dong Manh Hung FACTORS AFFECTING APARTMENT PURCHASE DECISION AND SATISFACTION LEVEL OF CUSTOMERS: AN EMPIRICAL STUDY OF RESIDENTIAL HOUSING MARKET IN HO CHI MINH CITY, VIETNAM. MASTER OF BUSINESS (Honours) Ho Chi Minh City-Year 2016 TIEU LUAN MOI download : skknchat@gmail.com UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Dong Manh Hung FACTORS AFFECTING APARTMENT PURCHASE DECISION AND SATISFACTION LEVEL OF CUSTOMERS: AN EMPIRICAL STUDY OF RESIDENTIAL HOUSING MARKET IN HO CHI MINH CITY, VIETNAM. ID: 22130027 MASTER OF BUSINESS (Honours) SUPERVISOR: Dr. Dinh Thai Hoang Ho Chi Minh City-Year 2016 TIEU LUAN MOI download : skknchat@gmail.com ACKNOWLEDGEMENT Firstly, I would like to express my gratefulness to my supervisor Dr.
Dinh Thai Hoang for his professional guidance, intensive support, valuable suggestions, instructions and encouragement during the time of doing my research. I would like to express my deepest gratitude to Dr. Tran Ha Minh Quan, Dr. Nguyen Dinh Tho, and other professors in the committee for their valuable time as the members of the thesis examination committee.
Their comments and meaningful suggestions were contributed significantly for my completion of this research. My sincere thanks are given to all of my teachers at International Business School – University of Economics of Ho Chi Minh City for their teaching and guidance during my master course. TIEU LUAN MOI download : skknchat@gmail.com ABSTRACT In the real estate industry, purchasing an apartment is one of the most significant economic decisions that people make, and it requires the purchaser to gather a lot of information regarding its features. In reality, a real estate product as an apartment is both a financial asset and a physical attributes comprising of its intrinsic attributes, extrinsic attributes and other factors that connect it to customer behavioral research and satisfaction level.
Therefore, better knowledge of the factors influencing purchasers’ behavior will help apartment developers to have better understanding and prediction of purchase decision making in real estate markets. In an effort to provide a better understanding of purchasing behavioral decision making context and influences to all apartment participants which are the developers, purchasers, and real estate agents, this study examined the relationships of these factors: apartment attributes, financial status, apartment service quality, purchasing decision making and customer’s satisfaction level of 214 respondents who have apartment purchasing transactions in real estate industry in the Ho Chi Minh City with an expectation of strengthening evidence in Vietnam. Employing the CFA & SEM analyses, the research findings indicated that there were the positive relationships among apartment attributes, financial status, apartment service quality, purchasing decision and customer’s satisfaction level. The study also points out useful practical and managerial implications, which support the real estate companies to have the marketing and sales strategies impacting greatly on customer purchase decision and help policy makers to use suitable policies to develop the Vietnam real estate industry.
Key words: Real estate industry, apartment attributes, financial status, apartment service quality, customer purchasing decision, customer satisfaction level, real estate organizations, HCM city. TIEU LUAN MOI download : skknchat@gmail.com CONTENTS ACKNOWLEDGEMENT ABSTRACT ABBREVIATION Chapter 1: INTRODUCTION………………………………………………………………….1 Background to the research and research problem.3 Research methodology and research scope. 6 Chapter 2: LITERATURE REVIEW .1 Apartment purchase decision .2 Apartment attributes and apartment purchasing decision .3 Financial status and apartment purchasing decision .4 Apartment service quality and apartment purchasing decision .5 Apartment attributes and customer satisfaction level .6 Apartment service quality and customer’s satisfaction level .2 Data analysis procedures. 27 Chapter 4: DATA ANALYSIS .1 CFA for the first-order constructs .2 CFA for second-order constructs .3 CFA for the final measurement model.3 Structural equation modeling (SEM).
45 TIEU LUAN MOI download : skknchat@gmail. 47 Chapter 5: CONCLUSION, IMPLICATIONS, AND LIMITATION.2 Limitations and future research. 61 TIEU LUAN MOI download : skknchat@gmail.com LIST OF FIGURES Figure 2.1 CFA model of financial status .2 CFA model of service quality .3 CFA model of purchasing decision .4 CFA model of satisfaction level. Error! Bookmark not defined.5 CFA model of Apartment Attributes .6 Final measurement model.
46 LIST OF TABLES Table 3.1 Source of data collection.2 The first run of CFA (of financial status, service quality, purchasing decision and satisfaction level) .3 Summarized of CR, AVE and Cronbach’α (first order constructs) .4 The first run of CFA of Apartment Attributes .5 Summarized of CR, AVE and Cronbach’α (Apartment Attributes) .7 Summarized of CR, AVE and Cronbach’α (final model).8 CFA Summary of eliminated item .10 Unstandardized structural paths. 47 TIEU LUAN MOI download : skknchat@gmail.com LIST OF APPENDICES Appendix A List of in-depth interviews’ participants. 61 Appendix B Qualitative in-depth interview. 61 Appendix C Qualitative in-depth interview findings.
70 Appendix F Correlations among components of apartment attributes, financial status, service quality, purchasing decision and satisfaction level. 76 Appendix G Final measurement scales. 77 TIEU LUAN MOI download : skknchat@gmail.com ABBREVIATION AVE Averaged variance extracted CFA Confirmatory Factor Analysis CR Composite reliability ExtrinA Extrinsic attributes EnvirA Environment attributes FinanSta Financial status IntrinsA Intrinsic attributes LocA Location attributes HCM Ho Chi Minh City PurchasD or PurchaseDecision Purchase decision SatisfLev Satisfaction level SEM Structural equation modeling SerQua Service quality SPSS Statistical Package for the Social Sciences TIEU LUAN MOI download : skknchat@gmail.com Chapter 1: INTRODUCTION 1.1 Background to the research and research problem Vietnam’s economy has been growing rapidly since the late 1990s when significant economic reformed and the country’s Open Door Policy were implemented. Vietnam’s growth rate is on average 6.4% in the last decade (The World Bank, 2015).
Following these changes, Vietnam’s residential housing industry also experienced fast development and expansion. However, Vietnam population was nearly 91 million people in 2014 and the population increased by 1. Additionally, the urbanization rate in Vietnam is also increasing at 3.3 percent annually and 33.1 percent of the population is living in urban areas (Thanh Nien News, 2014). In most of the big cities in Vietnam, particularly in Ho Chi Minh City, the business center of Vietnam, has around 7.9 million people in 2014 and the urbanization to its suburbs is quite fast.
Thus, the increasing in population and rapid urbanization in the developing countries like Vietnam create the house or apartment shortage at critical levels (Morel, Mesbah, Oggero & Walker, 2001). Moreover, an increasing house or apartment demand often surplus the pace of its supply (Zang, as cited in Phan, 2012). As a result, the demand for a house or an apartment is the urgent demand for each individual and households. The real estate market in Vietnam has been significantly fluctuating since 1990.
It might be seen as three times fever and declining prices in the two decades (Phan, 2012). After the economic depression in the period of 2012-2013, the real estate market has been shown signs of recovery. The successful real estate transactions in Hanoi in 2014 are 11,450 transactions (up by more than 2 times compared to 2013) and in HCM City are 10,350 transactions (up 30% compared with 2013) (Manh Tung, 2014). In general, Vietnam real estate market has taken advantages of population increasing and rapid urbanization which created a huge house or 1 TIEU LUAN MOI download : skknchat@gmail.com apartment demand, but nevertheless it still faces many difficulties.
The large real estate outstanding loans and a big number of inventories created a serious crisis (Xuan Than, 2014), particularly the apartment inventories and land inventories. The apartment current inventories are roughly equivalent to 26.000 billion VND and land inventories are roughly equivalent to 28,500 billion VND (Manh Tung, 2014). There are amended land laws and VND 30 trillion credit package to home buyers in an effort of Vietnamese government to rescue the real estate market. As a result of those efforts, Vietnam’s residential housing market is experiencing a recovery period.
This trend is in line with the efforts of Vietnamese government which are trying to renovate real estate industry in Vietnam. However, there are still ongoing challenges for the economy (CBRE Vietnam, 2014). Up to 2014, Vietnam has 92.690 billions VND real estate inventories; 19.520 in HCM City); 13.516 unsold low buildings (755 in HCM City) (CBRE Vietnam, 2014). Trinh Dinh Dung (as cited in Nguoi Dua Tin News, 2014) states that only government’s effort is not adequate for rescuing Vietnam’s real estate market.
One of the key reasons of this crisis is the real estate market supply does not meet customers’ demands as the house or apartment builders lack correct information of their customers of choice and real estate market conditions (Trinh Dinh Dung, as cited in Nguoi Dua Tin News, 2014). To survive and develop in this tough market, marketers and analysts of this industry are required to have an in-depth understanding of home or apartment purchaser’s decision criteria (Ratchatakulpat, Miller & Marchant, 2009) and their satisfaction levels regarding housing attributes and service quality (Torbica & Stroh, 2001). The problem regarding the lack of correct information of their customers of choice and real estate market conditions encourages the real estate companies to focus on the need of understanding their customers. There is an issue of how to know deeply the customer insight and 2 TIEU LUAN MOI download : skknchat@gmail.com their making decision behavior in purchasing an apartment.
Bettman, Luce & Payne (1998) emphasizes that customer choices are the process of selection, consumption, and disposal of any products and services which can often be difficult and are important to the consumer, to marketer, and to policy makers. He also states that “customer decision making is one of the most important areas of customer behavior and it requires gathering a lot of regarding information” (p. Thus, having the information of customer decision making will help the real estate companies to have the marketing strategies impacting greatly on customer mind. This is one of the keys in the success of any businesses.
In the recent decades, the concept of real estate purchase decision has been further developing in various articles and literature on managerial disciplines; thus, prompting more real estate developers use suitable reactions on their customer’s buying decision to achieve the home sales targets and customer’s satisfaction (Piron, 1993; Spetic, Kozak & Cohen, 2005). Kupke (as cited in Abdullah, Nor, Bazlin, Jumadi & Arshad, 2012) identifies real estate purchase decision as one of the biggest decision in one’s life and it would change that person’s life as the process involves a long time commitment. Basing on the real estate’s special characteristics, an apartment purchasing decision defines itself as a unique behavioral process which is different from other normal business purchasing decisions; and understanding how the purchasers behave is quite valuable for better suppliers’ reactions (Kinnard, as cited in Phan, 2012). Moreover, 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).
Vietnam market – transitional market has very specific cultural characteristics. Vietnam is considered a collectivist culture (Hofstede, as cited in Swierczek & Thai, 2003). People relationships prevail over important decision, where everyone 3 TIEU LUAN MOI download : skknchat@gmail.com cares, supports, and takes responsibility for members of their family and acquaintances. Vietnamese purchasers always consult with their colleagues and/or seniors, family members before reaching an agreement or a decision (McKinney, 2000).
Therefore, apartment’s developers in Vietnam should give a special examination on consumer apartment-purchasing behavior from the consumers’ perspective to deeply understand their customers. Up to present time, the numerous studies have been undertaken about the perceptions of apartment purchasers in terms of the apartment attributes, financial status, service quality, purchasing decision and customer satisfaction level in other countries (Haddad, Judeh, Haddad, 2011; Zeng, 2013; Opoku & Abdul-Muhmin, 2010). However, these studies restricted themselves to identify these concepts separately. In addition, very few scholars do the research about this issue in Vietnam - a collectivist culture in making important purchasing decision.