Homebuyer Purchase Decisions: Are They Anchoring to Appraisal Values or Market Prices?

Cheung, Ka Shing; Yiu, CY; Guan, Yihan

doi:10.3390/jrfm15040159

Cited by 4 publications

(4 citation statements)

References 40 publications

(40 reference statements)

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“…The results obtained are difficult to compare directly with other studies, as such attempts have rarely been made to date. However, these results confirm the conclusions presented in the work in papers addressing the price anchoring effect (Leung & Tsang 2013;Shie, 2019;Cheung et al, 2022;Kokot, 2023). This effect occurs and significantly improves the predictive quality of price models.…”

Section: Discussionsupporting

confidence: 89%

“…When sellers have periodic profit and loss preferences or when buyers attach value to historical housing prices, changes in the prices of real estate are predictable (Leung & Tsang, 2013). On the other hand, a paper (Cheung, et. al., 2022) used property values set by periodic valuations for tax purposes as anchors, proving the existence of a price anchoring effect in the secondary housing market.…”

Section: Real Estate Managementmentioning

confidence: 99%

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Econometric Modelling of Average Housing Prices in Local Markets and the Price Anchoring Effect

Doszyń,

Kokot

2024

Real Estate Management and Valuation

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This paper employs the econometric models of relationships over time to evaluate the change in the unit prices of apartments on the local secondary markets in Warsaw and Szczecin, depending on various socioeconomic factors. Indicators reflecting the influence of socioeconomic aspects in these cities and the lagged values of housing prices, acting as so-called anchors in this model, were used as the independent variables. The results obtained from this analysis indicate that it is the lagged prices of housing that have the strongest influence on the formation of price levels in the market. The study confirms the presence of the so-called price anchoring effect, which can be understood as the tendency of market participants to accept prices at levels that can be justified not only by socio-economic factors, but also by the price levels established in their minds. The main purpose of the research presented here is to show that there is no close relationship between quoted housing prices and their objective factors. The quality of models reflecting these relationships clearly improves when lagged housing prices are introduced as the explanatory variables, which may confirm the price anchoring effect derived from behavioral economics, meaning that the heuristics of anchoring and adjustment can be applied to the analysis of the behavior of a collective of individuals - many market participants.

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Section: Discussionsupporting

confidence: 89%

Section: Real Estate Managementmentioning

confidence: 99%

Econometric Modelling of Average Housing Prices in Local Markets and the Price Anchoring Effect

Doszyń,

Kokot

2024

Real Estate Management and Valuation

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“…8 To some extent, this study is limited by using appraisal values of properties because they are valuers' estimates of 'the most likely selling price [of the properties] at the date of valuation' (Auckland Council, 2021b) and are only updated once every three years (more information is provided in the Appendix). The advantages of using appraised values include a strong bidirectional association with markettransacted prices (Cheung et al, 2022) and an avoidance of the idiosyncrasies of individual trades. A second limitation of this study is the impact of the pandemic on housing markets and appraisals.…”

Section: Discussionmentioning

confidence: 99%

“…Therefore, the appraisal value can be regarded as trustworthy information reflecting the property value. Even though Auckland Council states that the revaluation is not intended for marketing or sales purposes, research conducted by Cheung et al (2022) found that market participants use the Capital Value as a price anchor in the price discovery process. Rating valuations consist of three components: Capital Value, Land Value and Improvement Value. Capital Value is the sum of the Land Value and the Improvement Value.…”

Section: Figure B1mentioning

confidence: 99%

The heterogeneous impacts of widespread upzoning: Lessons from Auckland, New Zealand

2023

Self Cite

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Zoning reform is increasingly recognised as an important strategy to increase housing affordability and environmental sustainability. Few cities have undertaken significant upzoning of low-density neighbourhoods, making the 2016 Auckland Unitary Plan (AUP) probably the most ambitious zoning reform in the world. Parcels zoned for single houses previously dominated Auckland, but three-quarters of them now allow multiple units. Existing studies have documented the building boom that followed this zoning reform, yet the relatively rare case offers additional insights. In this article, we use appraisal, census and zoning data on over 200,000 parcels in Auckland to answer three research questions about the heterogeneous impacts of the AUP. First, to what extent did upzoning increase the appraised value of properties’ redevelopment options? Second, did upzoning increase appraised property values to a greater degree in higher-income and more centrally located neighbourhoods? Finally, was zoning reform in Auckland significantly influenced by similar political pressures as in other countries? That is, was upzoning less likely (and downzoning more likely) in higher-income neighbourhoods? The answers to these three questions are substantially, it’s complicated, and yes.

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Behavioural biases in real estate investment: a literature review and future research agenda

Singh,

Kumar,

Goel

et al. 2023

Humanit Soc Sci Commun

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Psychological aspects of human nature cause behavioural biases and can lead to decisions that differ from what is expected based solely on rational analysis. The effects of behavioural biases on financial markets like stocks and mutual funds have been studied previously, but real estate has yet to receive much attention. The existing works in the real estate domain have focused on different biases, but no study has examined the works already done to provide concise documentation of these past works. Thus, this article is an earnest attempt to fill that gap. This paper reviews the articles which were sourced from Scopus and the Web of Science database, published between 1980 and 2022. The PRISMA model led to the inclusion of 86 articles for the review. Analysis revealed that anchoring bias, loss aversion, and herding bias have been studied extensively. On the other hand, biases like gambler’s fallacy, familiarity bias, framing bias, home bias, confirmation bias and mental accounting have been less explored. The paper identifies the substantial gaps in the existing studies, giving avenues for future exploration. The key ones are, firstly only a few biases have been studied extensively and many biases are less explored, particularly using primary data. This provides a vast available space for future work. Secondly, studies in developing countries are fewer, which needs to be addressed. Lastly, studies need to explore the interplay of different biases to create a more robust model that can explain the effect of these biases. The paper gives a conceptual understanding of different biases and what factors affect them. Also, it will help policymakers strategize their business and mitigate the negative effects of biases.

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Homebuyer Purchase Decisions: Are They Anchoring to Appraisal Values or Market Prices?

Cited by 4 publications

References 40 publications

Econometric Modelling of Average Housing Prices in Local Markets and the Price Anchoring Effect

Econometric Modelling of Average Housing Prices in Local Markets and the Price Anchoring Effect

The heterogeneous impacts of widespread upzoning: Lessons from Auckland, New Zealand

Behavioural biases in real estate investment: a literature review and future research agenda

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