The response to freehold growth information when estimating ground leasehold value

Abstract

PurposeThis paper is concerned with behavioural responses to reviewed ground rents in New Zealand. The focus is on how freehold growth information is interpreted when considering reviewed ground rents on ground leasehold value.Design/methodology/approachSemi-structured interviews were conducted with ground leaseholders to inform the design of a controlled experiment. The interviews revealed that (a) purchasers tended to directly compare freeholds to ground leaseholds and (b) used rudimentary valuation methods. In the experiment, 40 property investors were requested to estimate the ground leasehold value close to the ground rent review time. Thereafter, 20 of the investors reassessed their ground leasehold value estimate using a projection of the future ground rent and a statement as to freehold growth (treatment). The control group of the remaining 20 investors received the estimate of the future ground rent only.FindingsThe tendency for higher treatment group valuations indicated the growth information was too available. Comparing ground leaseholds directly to freeholds, rather than thinking about the cost implications, is attributed to a manifestation of the availability heuristic.Research limitations/implicationsThe study involves a typical ground lease arrangement (as verified by experts) in the New Zealand market where there are few protections for ground leaseholders. These findings justify prohibiting new ground leases where the ground rents are set by reference to freehold land value.Originality/valueThis paper extends behavioural theory (availability heuristic) to explaining human interaction with ground leaseholds.

Validating Factors Affecting People’s Intention to Use Finance Companies’ Services in Indonesia

“…Leasing and consumer finance financial services which enable its customers or clients to buy any kind of assets that they want, in which, later on, the companies providing this kind of service will pay these assets in full, and that customers or clients will pay the total price of such assets in instalments to these finance companies [1] [2]. In this case, since it was deemed impossible for customers to directly pay for all of these assets at once (due to the high level of price associated with these assets), then customers could buy these assets through finance companies which enable them to pay certain amount of money each month to the companies until all of the costs (together with the interests charged by the finance companies) associated with the assets had been paid, while enabling customers to own and use these assets at the same time [3] [4]. Therefore, it is no wonder as of why more and more Indonesians decided to buy various kind of productive or consumptive assets through -finance companies offering these kinds of services, considering that since most Indonesians were categorized as middleto-low-income individuals, tend this kind of benefits or features offered by finance companies enable these individuals to own an asset without having to directly pay for this asset all at once.…”