In the intricate tapestry of the real estate market, the decisions made by consumers are not just random choices but are deeply intertwined with various psychological, social, and economic factors. Understanding the nuances of consumer behaviour is crucial for all stakeholders in the real estate industry, from developers and agents to investors and policymakers.
John Herbst, CEO of Fine & Country SA, delves into how consumer behaviour shapes property buying decisions and explores the implications for the market as a whole.
READ: Home buying: Steering clear of common mistakes
Emotional triggers - It's no secret that emotions play a significant role in decision-making, especially when it comes to buying a property. Consumers often seek homes that evoke positive emotions such as comfort, security, and belonging. Whether it's the feeling of walking into a warm and inviting space or envisioning family gatherings in a spacious backyard, emotional triggers heavily influence the perceived value of a property.
Social proof and influence - Humans are inherently social beings, and we often look to others for cues on how to behave. The concept of social proof, popularised by psychologist Robert Cialdini, suggests that people are more likely to adopt a certain behaviour if they see others doing the same. In the context of real estate, positive testimonials, word-of-mouth recommendations, and neighborhood reputation can significantly sway property buying decisions.
Perceived value vs. price - Consumer behaviour is not solely driven by rational calculations of cost and benefit; perceived value plays a crucial role. Buyers often assess a property's value based on a combination of tangible factors such as location, size, and amenities, as well as intangible elements like prestige, aesthetics, and perceived future growth potential. Sellers must understand and effectively communicate the unique value proposition of their properties to resonate with potential buyers.
Decision-making ‘rules’ - In a complex and overwhelming market, consumers often rely on mental shortcuts or decision-making ‘rules’ to simplify the buying process. These ‘rules’, such as anchoring (relying heavily on the first piece of information encountered), scarcity (placing higher value on scarce resources), and familiarity (preferring options that are familiar or easily accessible), can significantly influence property buying decisions.
Market sentiment and economic factors - Consumer confidence, economic stability, and market trends also play a crucial role in shaping property buying decisions. During periods of economic uncertainty, consumers may adopt a more cautious approach and delay major purchases, while a stable economy may fuel optimism and increase demand for real estate investments.
Lifestyle preferences and aspirations - The concept of lifestyle congruence suggests that consumers are drawn to products and services that align with their self-image, values, and aspirations. When it comes to property buying decisions, individuals often seek homes that reflect their desired lifestyle, whether it's a trendy city penthouse apartment, a serene suburban retreat, or a luxurious waterfront estate.
Information accessibility and technology - Consumers now have access to an unprecedented amount of information about properties, neighbourhoods, market trends, and financing options. Online platforms, virtual tours, and data analytics empower consumers to make more informed decisions and conduct thorough research before committing to a purchase.
“Consumer behaviour is multifaceted and can shape the dynamics of the real estate market in profound ways. By understanding the underlying motivations, preferences, and decision-making processes of consumers, stakeholders can better anticipate market trends, tailor their offerings to meet consumer needs, and foster long-term success,” says Herbst.
READ: Do's and don'ts of first-time home ownership
Claude McKirby, Co-Principal of Lew Geffen Sotheby’s International realty in Cape Town’s Southern Suburbs in an article published in 2023 offered the following tips for a more seamless purchase and transition: (Read the full article here).
The Do's:
Research:
Conduct thorough research on the new town/city so that you have a better understanding of the various suburbs, the local amenities, schools and community vibes.
Understand Local Market Dynamics:
Markets can vary widely from city to city so familiarise yourself with current trends, property values, and potential future changes in the market to make informed decisions.
Budget Realistically:
Once you’ve looked into the various suburbs, establish a realistic budget for your new home. Consider not only the purchase price but also additional costs such as property taxes, homeowners' association fees, and potential renovations. Ensure that your budget aligns with your long-term financial goals.
Engage a Local Real Estate Agent:
Enlist the services of a knowledgeable and experienced local real estate agent who can provide valuable insights into the market, guide you through the home-buying process, and offer advice on the most suitable neighbourhoods based on your preferences and lifestyle.
Visit the City Before Buying:
If at all possible, visit the city and explore neighbourhoods before committing to a purchase. Spending time in the new location allows you to assess the local culture, amenities, and overall environment so you’re able to make a more informed decision about the specific area you want to call home.
Check Commute and Accessibility:
Evaluate the commute to your workplace, schools, and other essential locations. Consider transportation options, traffic patterns, and proximity to public transit. An efficient and convenient commute can significantly impact your daily life in the new city.
Consider Future Growth:
Areas experiencing expansion and revitalisation may offer excellent long-term investment potential, but not necessarily a large development next door to your new home.
Stay informed about upcoming projects and developments that could impact property values in the chosen neighbourhood.
Get Pre-Approved for a Mortgage:
Do get pre-approved for a mortgage before house hunting as this not only gives you a clearer understanding of your budget but also makes your offer more appealing to sellers. It streamlines the buying process and demonstrates your seriousness as a buyer.
Embrace your new community:
Once you have made your decision, start networking on social media, joining local community groups and pages and, once you’ve moved, attend local events.
Establishing a network not only helps in acclimating to the new environment but also adds a sense of belonging to your new city.
READ: Tips for first-time movers and 3 ways to keep costs low
The Don'ts:
Overlook Local Regulations:
Familiarise yourself with building codes, zoning regulations, and any restrictions that may impact your property. This knowledge prevents future surprises and ensures your plans align with local requirements.
Ignore Neighbourhood Dynamics:
While a property may be appealing, it's crucial to assess the overall atmosphere, safety, and community dynamics. Speak with locals, explore the area at different times, and consider the long-term liveability of the neighbourhood.
Rush the Decision:
Take the time to explore different options, evaluate neighbourhoods, and consider your long-term goals. Rushing into a purchase without thorough consideration can lead to regrets and dissatisfaction.
Neglect Future Resale Value:
Even if you plan to stay in the home for an extended period, it's essential to consider its resale potential. Rather choose a property that appeals to a broad range of buyers and has a good chance of appreciating in value over time.
Forget About Local Services:
Assess the availability of local services and amenities. Check the proximity of schools, medical facilities, grocery stores, and other essential services. Access to these amenities contributes to the overall convenience and quality of life in your new city as well as the resale value.
Ignore Your Intuition:
While data and research are essential, your feelings about a property and its surroundings matter. If something doesn't feel right, it's worth exploring further or considering alternative options even if you are on a tight schedule.
Underestimate the Impact of the Move:
Moving to a new city involves a significant adjustment so be prepared for changes in routines, social circles, and the overall pace of life. Give yourself time to adapt and build connections in your new environment.
“By combining careful research, financial prudence, and community engagement, you can turn the process of buying a home in a new city into a smooth and exciting adventure, laying the foundation for a fulfilling chapter in your life,” says McKirby.
READ: Top 7 items that get damaged when moving and how to protect them
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