1 INTRODUKTION

Centre for Finance Master’s Thesis Yield +37% - A collection of facts and qualities about appraisal and value off real estates in general and apartments with tenant ownership in particular. A glance of reality in Gothenburg. Magisteruppsats / Master’s Thesis Jonas Nyström, 800120-8555 Handledare / Tutor: Ted lidblom Economics, Finance and Business VT2006 / Spring 2006 1 Abstract 1 Acknowledgment 1 Table of Content 1 INTRODUCTION ................................................................................................................ 4 1.1 Research question ......................................................................................................... 5 1.2 Purpose ......................................................................................................................... 5 1.3 Definitions .................................................................................................................... 5 1.4 Disposition ................................................................................................................... 6 METHODOLOGY ............................................................................................................... 7 2.1 Topic............................................................................................................................. 7 2.2 Preconceptions ............................................................................................................. 7 2.3 View of knowledge ...................................................................................................... 8 2.4 Perspective ................................................................................................................. 10 2.5 Approach .................................................................................................................... 10 2.6 Collection of sources .................................................................................................. 11 2.7 Criticism of the sources .............................................................................................. 11 2.8 Collection of empirical data ....................................................................................... 11 2.8.1 Planning .............................................................................................................. 11 2.8.2 Selection of respondents ..................................................................................... 12 2.8.3 Interview guide ................................................................................................... 12 2.8.4 The Interview ..................................................................................................... 13 2.8.5 The printing of the Interview.............................................................................. 13 2.8.6 Criticism of empirical data ................................................................................. 14 APPRAISAL AND VALUE FRAMEWORK ................................................................... 15 3.1 Real Estate Appraisal ................................................................................................. 15 3.2 Definitions of value. ................................................................................................... 16 3.3 Location, Location and Location................................................................................ 17 3.3.1 Location models a historic view. ........................................................................ 17 3.3.2 Location models in urban economics. ................................................................ 17 3.3.3 The price of externalities such as view etc. ........................................................ 18 3.4 Characteristics of the housing market ........................................................................ 18 3.5 The market for apartments (in a political view.) ........................................................ 19 3.6 Market of apartments ................................................................................................. 20 3.6.1 Rent on apartments ............................................................................................. 20 3.6.2 Tenant ownership of apartments ........................................................................ 21 TO AFFECT THE OUTCOME ......................................................................................... 22 4.1 Preferences about housing qualities ........................................................................... 22 4.2 The Picture in Media of Homestyling and Homestaging ........................................... 24 4.3 The price is often determined by a bid process. ......................................................... 25 4.4 Price effects of specific quality. ................................................................................. 26 4.5 Marketing theory of Branding .................................................................................... 27 EMPIRICAL FINDINGS AND ANALYSE. .................................................................... 29 5.1 Broakers ..................................................................................................................... 29 5.2 Appraisal of apartments ............................................................................................. 29 5.3 What determines value ............................................................................................... 30 5.4 Location ...................................................................................................................... 30 5.5 Price effect of view etc ............................................................................................... 31 5.6 The Gothenburg market for apartments. .....................Error! Bookmark not defined. 5.7 The customers preferences ..........................................Error! Bookmark not defined. 2 3 4 5 2 5.8 Homestyling and Homestaging .................................................................................. 33 5.9 The Biddings .............................................................................................................. 35 5.10 The experiment ........................................................................................................... 35 6 CONCLUSION .................................................................................................................. 37 6.1 Future research ........................................................................................................... 38 7 CRITERIA’S OF TRUTH ................................................................................................. 39 7.1 Validity, Inter subjectivity, Practical usage ............................................................... 39 7.2 Systematic in the data capturing. ................................................................................ 40 Apendix 1 ................................................................................................................................... 43 Apendix 2 ................................................................................................................................... 45 3 Real Estate Apprisal Thesis 1 INTRODUCTION In the year of 2001 68% of U.S. households were homeowners and their housing equity accounts for 31% of its totals net wealth.1 Housing is a necessity for households, but also considered expensive, it accounts for about 30% of their total consumption expenditure2. In Sweden real estate prices has risen in general since 1996, which was the year the market had stabilised from the real estate crises that occurred in beginning of the 90th. Particular the apartment price has appreciated since 1996 and the prices of apartments in cities like Malmö Stockholm and Gothenburg is today in average apprised about three times higher. The title yield +37% is referring to the astonishing price development of apartments with tenant ownership in central Gothenburg last year, which was the highest yield in the country of Sweden 20053. Debates have occurred in media questioning if there is a new real estates bubble, but a lot of experts states that there is several structural differences today compared to the situation in the 90th. Real estates is used as security to high percentage of its total market value today, thereby the banks are taking on a high risk in the real estate sector. An anecdote is that banks in general are to reluctant when giving loans in good times and too restricted in bad times, perhaps that’s the situation we can see today. The interest rates is affecting house prises4, but in an article in Göteborgs Posten 17 April 2006 under the headline “Higher rates doesn’t cool off the housing market” You could read that “not even the higher interest rates affects the buyers from increasing its bets”.5 Location is and has also historical been the most significant explaining variable of real estate price.6 With the development of computer technology regression models is nowadays widely used to determine other explaining variables, these factors are often called externalities. The price of aesthetic externalities in the most recent research found that houses that boarder to forest ads 19-35% on selling prices. Houses with water frontage ads premiums of 89.9147%.7 The latest development in real estate valuation theory is (ROA) Real Option Analysis.8 The literature shows three different approaches to real estates appraisal. Two of them is grounded in economic calculation of value. The third one is used by apartment brokers in practise today and is a comparable approach to value. These approaches are well defined but there is a lack of research regarding new phenomena’s such as homestyling and homestaging, which there is no scientific research about9. Today there are different television programs and articles writing about the phenomenon. Homestyling “flyttstajling” have become a new word 1 2 Donald, G. at al. (2005). Evaluating the Risk of Housing Investment. The Appraisal Journal. Attenhög, M. (2003). Vilka effekter har ökad konkurrens på bostadshyresmarknaden? Tryck & Media, Stockholm. 3 Press massage. (2006-02-10). Bostadsrättsmarknaden i centrala Göteborg hetast i landet. www.maklarstatistik.se. 4 5 Lars Gunnar Wolmesjö. (2006-04-17) Higher rates doesn’t cool off the housing market. Göteborgs Posten, Ekonomie. 6 Laakso, S. (1997). Urban Housing Prices and the Demand for Housing Characteristics. Pp5 7 Bourassa, S.C. Hoesli, M. & Sun, J. (2006). The Price of Aesthetic Externalities The Appraisal Journal. 8 Wang, K. & Wolverton, M.L. (2004). Real Estate Valuation theory. Volume 8. Aprisal Institute 9 Carl Grafberg. Business Economist (2005-12-16) Upplys alla husköpare om homestaging. Dagens Industri. 4 Chapter 1 INTRODUCTION in Swedish dictionaries. 10 And at www.boxerprice.com one can buy gift cards with homestyling. Studies show that within ten seconds a buyer decides if he or she is interested in buying the object or not.11 This implies that homestaging and homestyling procedures are of great importance for the outcome of the selling. A study made in Stockholm shows that the objects specific esthetic qualities account for 10-12% of the selling price.12 The demand for apartment is segmented to eight groups, all with different preferences.13 The houses themselves are believed to have personality and marketing theories of branding is applied to the topic of apprising apartments.14 In Sweden a bid process starting in the initial price set by the brokers often determines the price of apartments with good locations. How does the broker come up with the values that make the grounds for their set prices? 1.1 Research question How do brokers reason when they appraise apartments with tenant ownership in Gothenburg and what do they believe, is to determine the outcome of the followed bid processes? 1.2 Purpose My purpose is to provide an overall picture of the appraisal and value phenomenon with a special interest in apartments with tenant ownership. This is done to enhancing the understanding of the situation in general and particularly in central Gothenburg. The “media circus” of homestyling and homestaging need reliable sources and this is a step in the direction of providing scientific findings for the effects of the new business. This work should be seen as a pre-study in the topic. 1.3 Definitions Tenant ownership Special types of ownership where members in an association or housing association (Bostadsrättsförening) collectively are owners, but with a special usage right (Bostadsrätt). (Chapter3.6.2) A broker appraises an apartment and later typical receives a final price in a bid process. Thereby the apartment receives a monetary value, not necessarily the same value the buyer value the apartment. The buyer might think he or she paid too much for it Appraisal and Value 10 11 Svenska Språkakademin. (2005-12-31) Årets nya Ord. Hufvudstadsbladet. Matzke, L. (2004) Home Staging, 1st edition, Center Stage Home. pp9 12 Werner, I. B. (2000). Spelar kvaliten någon roll för priset? KTH Stockholm 13 Werner, I. B. (2003). Preferenser beträffande bostadskvaliteter. KTH Stockholm 14 Alain de Botton. (2004-10-31) Stylat för försäljning. Svenska Dagbladet 5 Real Estate Apprisal Thesis but needed to buy it anyway by various reasons, alternatively he or she believe it was a bargain. These are just a few approaches and there is an appraisal and value framework (chapter 3) that brakes down this further. Homestyling Permanent arrangements in a selling situation of housing in order to perceive a higher selling price15 (Se chapter 3.9) Temporary arrangements in a selling situation of housing in order to perceive a higher selling price 16 (Se chapter 3.9) Homestaging 1.4 Disposition 15 16 Siv Strömqvist Svenska Dagbladet 06-02-04 Siv Strömqvist Svenska Dagbladet 06-02-04 6 Chapter 2 METHODOLOGY 2 METHODOLOGY I have read many reports and articles, which is ways of making subjective thoughts objective. Only when the researchers admits that his mind plays a subjective part in the research process and start clarifying what effects it may have had, I believe we can consider the work to be subjectively controlled by a “sober” driver. This chapter describes methodological choices and standpoints made during the study. 2.1 Topic The idea of what drives value on tenant ownership of apartments has been with me for years. When I sold my first apartment in 2002, I made a huge profit and I believe that about two third of the profit came from the interior designing I had made. I’ve been in the market for six years and I witness the tremendous upturn. Recently when I started to look into the issue in an academic way, I noticed the lack of research in the field. I felt that a bit strange regarding the high part of peoples cost of living that goes to rent and interest payments on mortgage. This study addresses the topic of real estate appraisal and valuation; it is an applied science theoretical and methodologically based on Economics, Finance and Business.17 The investigated phenomena are defined in the market for real estate and apartments with tenant ownership as well as the broker institutions. The topic is actual and articles about prices of apartments, homestyling and homestaging can often be found in the newspapers but there is no research of the effects. 18 The subject is interesting for the society, for buyers and sellers as well as appraisal researcher because it is representing a gray area or even a gap in the research field. It is my personal interest in the subject that keeps me motivated to work with this thesis. 2.2 Preconceptions In the hermeneutic view preconceptions makes the ground to our understandings. 19 Experiences and preconceptions are affecting the way a human being look upon and relates to the world. These are individual, and grounded in the researcher’s social background, education, practical experiences etc. Practically everything a person has experienced follows him through life and affects everything the person does along with his values.20 17 18 Bo Söderberg, Essays in Real Estate Appraisal, (Stockholm 1999), s13. Di ingen forskning 19 Sigbritt, Franke-Wikberg, Vetandets vägar (Lund: Studentlitteratur, 1994), 313. 20 Maj-Britt Johanson-Lindfors, Att utveckla Kunskap – om metodologiska och andra vägval vid samhällsvetenskaplig kunskapsbildning, (Lund: Studentlitteratur, 1993), 25. 7 Real Estate Apprisal Thesis Myself consider the fact that my preconceptions and my background have affected the way that this study has been conducted as natural. The effects can be seen in all parts, my ambition hasn’t been to avoid this. Instead I have been focusing on making it clear to the reader, and also showed my awareness of subjectivity that comes with it. My name is Jonas Nyström, I am born and raised in the city of Umeå in the northern part of Sweden. I have been studying at universities in Umeå, Gothenburg, Turin and Beijing. My majors are Management and Finance. I was elected chairman of the student futernety for Finance at the Umeå School of business and economics in 2003 and 2004 and also of Unga Aktiesparare (Young shareholders) in Gothenburg year 2005. My interests are participating in sports activates and to travel the world. Besides studies I have been occupied with building, fixing up and restored cars, boats and apartments. Six years ago when I bought my first apartment I did notice the large appreciation off the market and since then the market has continued in that rapid growth. My opinion is that the bank sector is too generous on mortgage terms leaving individuals and perhaps even them vulnerable. I have personally experienced a tremendous price development above the general price development when basically renovating an apartment. I’ve also seen sell examples like mine which makes me believe that it is a sellers market. Sometimes with unbelievable high biddings on apartments of high standard located in the city center. When glancing back in history the way we live has changed from one year to another. I witness one reason change, the building of new apartments have shifted from making them all the same to provide the customers with a set of custom choices. Nowadays, it appears to be a demand for more personalized apartments which make me believe that the customers of today has the ability and are willing to pay for a higher standard when buying apartments. 2.3 View of knowledge The view of knowledge can be divided in two parts; Ontology and Epistemology. Ontology is our perceptions about the studied reality and Epistemology is how we relate to it. I have no interests in explaining the concepts of positivisms and hermeneutics, which are said to be the two cornerstones. I will rather with simpler words explain the view of knowledge I applied in this particular study for its purpose. This view can also be understood as the hermeneutic view of knowledge; which means to interpret, clarify, translate, and to make clear.21 I think of myself as a part of the society, which I study. My work is thereby a part of what is going on in the society at present time. 22 My perception (Ontology) about the human beings is that we are completely unique in relation to everything else on earth. I do not believe that human being act (Epistemology) rational in every situation, although it can be helpful to make assumptions about rational behavior. Chapter 3 start by looking at the human being as being rational like the “economic man”, and Chapter 4 goes further and further from the 21 22 Karin Widerberg, Kvalitativ forskning i praktiken, (Lund: Studentlitteratur, 2002), 26. Jan Backman, Rapporter och uppsatser, (Lund: Studentlitteratur, 1998), 47. 8 Chapter 2 METHODOLOGY economic rational behavior to a “psychological” or “emotional behavior” approach. My study is subjective from the start to the end and I tried to clarify subjectivity. This is partly a choice of mine and the level of subjectivity is increasing in this thesis and can especially be seen in the end by sentence like, “I think”, “he thinks” etc. In an ethical way you can ask about the way, which I choose to approach the topic, and with qualitative research come variations, diversity and complexity.23 I will argue that it’s impossible today to be completely objective when it’s drowned to the far extremes, and wouldn’t you agree that it would be fairly boring in the long run if all humans were exactly alike. I am convinced that creativity and knowledge is related to each other, which verify the chosen amount of freedom that comes with a qualitative method. Critical thinking has been accused of being individualistic, aggressive and confronting instead of cooperative. Critical thinking is said to only have a rational view, and thereby misses out emotions.24 I do not share this view, and I believe it’s grounded in misinterpretations of thoughts. The view of knowledge has many ways; the objectifying way where the human is separated from the research can apparently be looked upon, as cold or strict. The positivistic view of knowledge that I would like to call the positivistic perspective is a crucial part of research, (I call it perspective since I believe is ought to be an active dynamic research choice rather than passive static thoughts). If I had chosen a positivistic perspective, standpoint or approach it would naturally had lead to other choices and a different outcome of the study. Instead of trying to understand and interpret the problem, which I made in this thesis, I would have tried to explain it and thereby end up with a more or less significant answer. The positivistic approach is widely used for examine externalities which drives values. A regression model is out of the scale and scope of this thesis, there is a lack of research in this field particularly in Gothenburg and of the topic in general. Qualitative qualities of the phenomenon of the market in Gothenburg will later serve as guidance for future quantitative and qualitative research. As the situation of today with the newspaper writing about the phenomenon and the lack of research an explorative approach for the study is best suited.25 Some traditional researchers may think that the scientific quality of a work with a qualitative method is low, but a statement like that is in its nature subjective and probably grounded in research tradition. In my view the scientific quality lies in the clarifications and evaluation of different choices when studying a phenomenon, why is one way chosen over another and what is or may be the consequences of that. To some extent nothing is really necessarily right. The hermeneutic as a view of knowledge have been taboo within many research traditions but are achieving more acceptances. In the society of today it’s very important with scientific studies with subjective standpoints26. This is also true for the Advance Finance departments. 23 24 25 26 Widerberg, 30. Bettina Stenbock-Hult, Kritiskt förhållningssätt (Lund: Studentlitteratur, 2004), 14. Jarlbro (2000) Karin Widerberg, Kvalitativ forskning i praktiken, (Lund: Studentlitteratur, 2002), 31. 9 Real Estate Apprisal Thesis 2.4 Perspective I look upon myself as part of a “process” within the reality that I study. My ambitions have not been to objectively examine the topic because my interest is to study how the human being percept and respond to his or her surrounding reality. My perspective thereby fits with a qualitative perspective27. The problem of valuation concerns not only the buyer and the seller represented by the brokers, it also concerns the capital provider for example the banks and in the extended view the complex interrelationships with other markets. For example a real estate bubble affects the whole economy and traditional the real estate market is affected by parameter such as interest rates and unemployment etc.28The topic can be studied from different perspective, on society level, on corporation and individual level.29 The perspective reflects the conclusions of a study30. My focus is on professional individuals perceptions (the brokers) about the behavior, aggregated perceptions and individual perceptions of the buyers in the market as well as their firms’ valuation technique used. The studied individuals represent their companies view in the questions about appraisal method used. It’s representing the view of other individuals (the buyers) when qualities that affect the final price are studied. The dual perspective comes from the stated problem. 2.5 Approach There are different ways for a researcher to approach the empirical reality. The two cornerstones are Deduction and Induction.31 Deduction has its starting point in existing theory and the empirical reality is tested against that. With induction the empirical reality is studied and theories are shaped from the results. Deduction is a way of verifying and reshaping theories while induction creates something completely new32. There are various ways between these extremes.33 The best way of describing the way I approach the empirical reality is in the form of a process. In the beginning I made a literature study of real estate apprising theory and searched for research and academic articles on the subject. This was made in a process new references gave new insights and lead to new references. After a while some sort of theoretic saturation or fulfillment accord and I was ready to start writing an appraisal / valuation framework. I didn’t consider myself limited to my theoretical framework in a way that I was also searching empirical for new insights on the topic. In the beginning of the process I knew almost nothing about theory of appraisal and valuation of real estates. I had many ideas and 27 28 29 Backman, 47. Idar Magne Holme och Bernt Krohn Solvang, Forskningsmetodik, Översättare Björn Nilsson, (Lund: Studentlitteratur, 1997), 47-50. 30 Idar Magne Holme och Bernt Krohn Solvang, Forskningsmetodik, Översättare Björn Nilsson, (Lund: Studentlitteratur, 1997), 47-50. 31 Patel &Davidson, 1991, 20. 32 Holme &solvang, 1997 33 Johansson Lindfors, 54-59. 10 Chapter 2 METHODOLOGY thoughts regarding the percent market situation in Gothenburg that I was searching support for in literature and reality. The approach is thereby a mix of the mentioned extremes and partly explorative in nature. Generally I dislike the way deduction an induction is used in master thesis. In such a limited time frame as two months in relation to the students available reassures I believe is a bit strong to talk about testing theories an even more wrong to talk about creating new ones. The intended use of this thesis is deeper knowledge of the topic, for others and me. When you are taking subjective view to the problem like I do, it automatically leads to more answers then one to the problem. The direct answer I am going to get is based to a set of specific situations, which not directly can be transmitted and generalized. But it indirect leads to a picture that enhances the understanding of the studied phenomenon. Within this approach and the quantitative method I will end up with a colored overall picture of the phenomenon that is enhancing the understanding of it, and thereby I achieves my goals and fulfill my purpose with the study. 2.6 Collection of sources We separate primary and secondary source, primary sources is data that the researcher collects himself while secondary sources is collected and worked up by others.34 My primary source from the empirical research is discussed and criticized in their respective chapters. 2.7 Criticism of the sources There are some important aspects a researcher should concern when collecting data. They are the origin of the source, its topicality, and its immediate and empirical grounds.35 Cautions needs to be taken when dealing with second and third level sources because there is always a possibility that there have been misinterpretations of the origin intentions of the original source. If they are used it is important that they are scientific acknowledged and reliable. 36 2.8 Collection of empirical data One way of enlighten the topic quantitative is through interviews. I have performed one in depth interview controlled by an interview guide. I recorded the interview, and printed it word by word in the original language Swedish and later on translated into English. In this section I present methodological choices of empirical nature, the choices are based more or less on free will. 2.8.1 Planning In the beginning stage of the thesis I put away two weeks for the empirical part of the thesis. Since I’m a single writer I figure I didn’t had the time to write down the recorded interviews word by word. That’s a very time consuming procedure and off course the efforts, have to be 34 35 Bengt-Arne Bengtson et al., Forskningsboken, (Stockholm: Liber Ekonomi, 1998), 39. Johansson Lindfors, 88. 36 Ibid., 89.21 11 Real Estate Apprisal Thesis but in relation to the gains. Later on I made the choice of spending more time on the literature study to the cost of time to spend on empirical work. I did find new interesting insights that I valued very high, it added up to a completely new chapter (To affect the outcome). I decided to let the respondents of my planned interviews, also to make a practical valuation. This was done on my own apartment as an experiment of comparing the valuation techniques in practise as well as the price they set, arguments around it and the expected outcome of a selling. This was done as observation and free discussion, it was not recorded or controlled by me and I will not describe it in detail in the thesis. It was a interesting experiment and I will comment the result in the chapter (empirical findings and analysis). To spend the interview time effective in a way that I was able to capture different types of qualities related to my literature study I chose to control the interview by an interview guide. The interview guide was made in two forms, one limited version to send out to the respondents so they could be prepared and one for me with a full set of questions. To be prepared for the interview I also study the WebPages of the broker company’s in Gothenburg. I am grateful for my interview with Stefan Rehler at Svensk Fastighetsförmedling for taking the time I was promised and I wanted to be well prepared. 2.8.2 Selection of respondents I chose a specific research question and thereby had a specific sample regarding the topic. 37 According to that along with previous methodological choices, I could then choose among brokers firms and brokers in the Gothenburg region. I selected the respondents subjective after the criteria to enlighten the research question from different company angels and thereby pick brokers from different brokers firms. I picked the three biggest firms; Bjurfors, Svensk fastighetsförmedling and Lundin. This is in line with a strategically selection criteria.38 For reasons of access to information it’s important to find individual with good knowledge that also is willing to answer the questions.39 My thoughts was that a young broker had some working experience but better or at least more recent education grounds, since I already have the theoretical side well covered by my literature study I valued experience in the market for my purpose. The selection of respondents is crucial to the outcome of the study. Initial I was very satisfied with the booked appointments with Melissa Mahan at Bjurfors, Christian Lundin at Lundin and Stefan Rehler at Svensk Fastighetsförmedling. 2.8.3 Interview guide The interview guide (see appendix 1) was constructed with some general questions that was sent to the respondents in advance. By doing that the respondent could be prepared and also control the process of the interview themselves a bit regarded to schedule. I wanted to make sure that I covered everything of interest from my literature study and thereby believe the 37 38 39 Backman, 79. Inga-Britt Lindblad, Uppsatsarbete En kreativ process, 24-26. 12 Chapter 2 METHODOLOGY guide was a big advantage in the interview. The guide was constructed with a time schedule for each section. The first question was about the respondents’ background and should serve to create a relaxed interview atmosphere that leads to a better access40. I didn’t send all questions to respondents in advance, because I was afraid it could have affected their answers. I wanted them to answer the questions of easy nature freely and then, if necessary come with the prepared counter questions. In my version of the interview guide (see appendix 2) I had specified, more questions grounded in the literature study that I particularly wanted answered. The respondent could not see this during the interview. 2.8.4 The Interview I have previously during my study performed many interviews. That has been a strength when conducting this thesis, I believe it has lead to a better access and the fact that the interview has run according to the guide. My experience is interviews with peoples on top positions in different industries and never have the respondents had to cancel or postponed interviews. Unfortunately the interview with Lundin was postponed and the interview with Bjurfors was cancelled on short notice. Stefan Rehler from Svensk Fastighetsförmedling when he was vaulting my apartment four days after my interview with him, he comment the cancellations of the other respondents that this weeks brokers in Gothenburg have “workloads over their heads”. It’s an extraordinary peak time before this summer. The Interview with Stefan Rehler was done at his office on the 19 of May 2006 between 11:00 and 12:15. The Interview was taped and the recording was good. The access was good and Stefan Rehler showed good knowledge about the topic and often backed up his answers with practical examples from his long experience in the job. Stefan Rehler was chief of the department located at liné. I believe that he gave an accurate picture of the situation. I perceived spontaneous answers that he gave me as honest. He showed good working ethics and a long perspective on the outspoken strategy. The respondent spoke about 85% of the interview time. I am very pleased with the interview and because I manage to found one god individual as respondent it lead to good access in the interview. 2.8.5 The printing of the Interview To write down taped interviews is very time consuming and should be compared with the positive opportunities of shining through and systematisation that comes with the digital text.41 The outcome of the interview with Stefan Rehler was very good and I felt that it was important to write down everything from the tape. It also helped for the translation. Since the two other interviews was cancelled I had more time then I expected to work on the one with Stefan Rehler and because it was a particular good interview the empirical findings consist of lots of quantitative qualities of the situation in Gothenburg. The Interview was written down word-by-word, in speaking language the days after the interview and then translated to English. I believe I have a very god understanding of the respondent, I played 40 41 Johansson-Lindfors, 119-124. Lindblad, 27. 13 Real Estate Apprisal Thesis the tape over and over again to make sure I got everything right. The next stage was to translate it to English writings. The text is transformed and about 40% of the text is left but hopefully all of the qualitative qualities. The structure of empirical findings is under similar headlines as the general question from the interview guide. 2.8.6 Criticism of empirical data The access to empirical information is good because the interviewed person had long experience and good knowledge about the phenomena. My empirical collected material only comes from one source, which is narrow. I believe I got accurate and honest answers on my questions. The broker’s subjective picture as well as mine reflects the answer of the research question. My preconceptions has affected the interview questions and the respondent preconceptions his answers. I have chosen to include a presentation of the respondent and Svensk Fastighetsförmedling. My knowledge from my literature study in the topic makes me a good interviewer and interpreter but also leads to strong preconceptions of the reality. I have experience of doing six in depth interviews before which was a strength when doing this. The personal chemistry between the respondent and me was good. It’s always a risk that I wasn’t being enough critic to the answers, as if the chemistry didn’t fit. But on the other hand the access would probably not be as good then either. Obviously, it’s in the interest of the respondent to talk good about his company and especially since he was head of department. The interview manual could have affected the respondent and thereby it’s possible that the outcome is less impulsive.42 I prevent that by only giving out the general questions. Some subjectively chosen question was included simply because I didn’t wanted impulsive answers on those because I thought it would only be positive with some thinking behind those questions. I had classmates to read my version of the interview guide and asked how the questions could be stated in different ways and we have also discussed formulation and placing off the questions. It has helped me and I believe it’s a good procedure since after a working with something a while it’s easy to be blinded by own thoughts and ideas. I presented the interview guide as appendix 1 and 2. 42 14 Chapter 3 APPRAISAL AND VALUE FRAMEWORK 3 APPRAISAL AND VALUE FRAMEWORK I would like the reader to be aware that real states consist of two parts: land and buildings. Keep in mind that value is drowned from both of them in different proportions depending on the valuation context. A theory that explains everything is not a theory at all. 3.1 Real Estate Appraisal The real estate market can be divided into submarkets such as residential, industrial, commercial and vacant land markets. Another way is to divide the real estate market by size, location or by type of structure.43 Swedish tax law (fastighetstaxeringslagen, FTL) for tax purposes divides the market into (FTL 1979:1152, chapter 2): small houses, rental houses, industrial real estate, specialized real estate and commercial real estates. There are different approaches to value in the different valuation situations. The common apprising techniques used by the appraisals in Sweden are: the “Ortpris” method, the “Avkastnings” method and the “produktionskostnad“ method44.  The location price method (“Ortpris”) is a comparable valuation method. Previous sale of properties in the same area is compared with the object that is under valuation45. It is a market valuation of the location. In the case for odd real estate there might not be comparable properties in the market then the market simulation method can be used to simulate a market. Objects on other real estate markets with similar characteristics and the same type of building that has been offered is then studied.46 Traditionally Site Size adjustments have been done linear but researchers have lately showed that the relationship is non-linear.47 The future returns method (“Avkastnings”). Are the benefits of the ownership48? There are two ways of measuring these benefits. The cash flow method use forecasts of future cash flows and a residual value discount back in time49. Also known as the Net Present Value (NPV) of future returns. The Income / Cost method takes rental incomes and cost into account50. This is also known as Internal Rate of Return (IRR). The production cost method (“produktionskostnad”). While the first two methods are indirect valuation methods; this method is a direct method of valuation51. The value of the real estate is the value of reproduction it, minus the depreciations related to the age and usage52.   43 44 Jaffe & Sirmans, 1995, p 10 LMV 2004 p1-6 45 s8 46 Ahlström, 1989, p 32 47 Joseph S. Rabianski, PhD (2005) “Site Size Adjustments: A Technique to Estimate the Adjustment Magnitude” The Appraisal Journal. 48 Petersson,1991,p39 49 LMV, 2004, p120 50 Ahlström 1989, p 20 51 Lmv, 2004, p43 52 Ahlström , .1998, p.48 15 Real Estate Apprisal Thesis When extending the real estate appraisal matter to international sources, I find that similar techniques are used. The approaches to valuation are: the market comparison approach, the income approach and the cost approach53. These appraisal methods are focusing on different aspects on the real estate object and have been used for two centuries.54 This is really an applied way of investment calculation and valuation. It’s not specific to the real estate topic and during my studies at different university’s, I have come across with these methods several times before in courses like investment calculation and company valuation. After writing this part I started to think how the latest development in the subject of investment calculation, the real options analysis (ROA) could be applied for real estates valuation. Eventually I find out that this approach nowadays is included in textbooks to be used for real estate valuation courses. The analogy of looking at the holdings of vacant land as an option to develop a complete building at a future date is among others used by Titman (1985), Capozza and Helsly (1990), and Williams (1991) and Gardner (1995).55 “These models shows that the source of vacant land value derives from the right, but not the obligation, to develop an underlying asset (a completed building) by paying the relevant exercise price (costs of construction)”. 56 There is still a huge gap between theory and practical applications.57 “There is a very large and important difference between an option of what someone might do under hypothetical circumstances and an examination of actual transactions.”58 3.2 Definitions of value. This thesis is written with the believes that value lies in the eyes of the beholder. I provided three definitions of value. Three approaches: the income approach defines value as capitalization while the market approach relates a specific single object to values set by a market. The investment approaches define investment value, as the maximum price an investor is willing to pay in relation to alternatives.59 The International Valuation Standard Committee (IVCS) 2001 standards: “Market Values the estimated amount for which a property should exchanges on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing where the parts had each acted knowledge ability, prudently, and without compulsion.”60 53 54 Jaffe & Sirmans 1995, p 315 The Apprising Institute 2001. 349-603 55 Ko Whang, Martin l Wolvrton 2002 Real Estate valuation theory pp.414 56 pp 413 57 pp 414 58 Albert R. Wilson (2006), “Contingent Valuation: Not an Appropriate Valuation Tool” The Appraisal Journal. 59 Jaffe & Sirmans 1995, p 4-5 60 LMV, 2004 pp3 16 Chapter 3 APPRAISAL AND VALUE FRAMEWORK The Appraisal Institute in addition to the market value they also defined a usage value. The usage value is connected to a specific usage and not the amounts received in a sale, or the highest or best usage.61 3.3 Location, Location and Location. Location is often the answer to the question of what determines the price. 62 Other factors are: building condition, construction permit, time of sale, rent level, rent contracts vacancies and the level of the standard. Geographical location is referred to in which; country, city or neighborhood the real estate is located in. Another way is to see location in relation to other things for example the exposure to as many people as possible. Shops and boutiques will often be located where most people are passing by. Residential location is affecting by factor around the location.63 Next section gives a historical view on location and the section after takes a deeper look in the important factor of location in relation to work. 3.3.1 Location models a historic view. The theory of urban residential location is based upon microeconomic theory of the consumer with the special emphasis on location. Housing cost and transport cost normally depends on location, thereby location affects the budget constrains of the households. This theory goes back to the beginning of the 1800´s theories of land use was developed by Tunen and David Ricardo and in 1870´s Henry George develops theories of land rent. The foundation of the modern approach to urban economics is based on the work of Alonso 1964 who developed the household location theory. The works of Muth 1969, Mills 1972 and Fujita 1989 further develops the theory.64 3.3.2 Location models in urban economics. The assumptions of the basic location model of Alonso are:65     The city is mono centric: It has one restricted Centrum, Central Business District (CBD), where work places are located. The transport system of the city is radial and dense in all directions. It is also free congestion. All transport is between homes and work places, which are located in the Centrum. The city is round. It is flat and similar in all directions. All lots are similar, except the size. There are no public goods or externalities. 61 62 Apprisal Institute 2001, p 24 Fredrik & Robert (2005) Real estate Apprising pp 49-90 63 LMV 2004 107-108 64 Seppo Laakso, (1997), Urban Housing Prices and the Demand for Housing Characteristics. Pp5 65 pp 6 17 Real Estate Apprisal Thesis The basic models as well as additional versions of the model all has center at CBD. In reality residential areas for example differ with respect to local services, quality of environment, social structure and local taxes. According to Fujita 1989 this can be extended as local externalities and taxes if we make the very strong assumption that they are functions of CBD distance.66 These are static models that represent long run land use and prices. They do not deal with new equilibriums after changes in exogenous factors or short run fluctuations in the market. Change of urban land use is a slow process because buildings are, expensive and need long planning and construction periods67. On the other hand short run fluctuations in prices and construction volumes can be drastic so dynamic aspects are of importance in an appraisal situation. 3.3.3 The price of externalities such as view etc. Although location is the most important factor it does not fully explain the selling price and surveys of other factors. Externalities typical use hedonic price functions to determine effects of other factors then the location models. To achieve these other factors need to be controlled for; a good way seems to be to use similar objects in similar location etc. These functions can nowadays easily be calculated with regression in computer programs and there is a great amount of international research done in this field. Typical they use dummies 1 when the externality is present and 0 when it isn’t. The price of aesthetic externalities found in resent research is:68 Thorsnes (2002) building lots that boarder to forest adds 19-35% on selling prices. Bond, Seiler and Selier(2002) report a premium of 89,9% for waterfront view. Benson, Hansen, Schwartz and Smersh (1997) found that in Washington, U.S. ocean frontage add 147% to selling price, ocean view 32%, and partial ocean view 10%. Hoesli and Sun (2004) found that in Auckland, New Zealand, attractive buildings in the neighborhood adds 37% while neighborhoods with only poor quality landscaping experience a -51% impact on price. Further particular attractive improvements in the immediate surroundings add another 27%. 3.4 Characteristics of the housing market The combination of characteristics in the housing market makes housing a special good. Housing is a necessity for the households but also considered expensive because it’s the biggest items (32%) in the consumption expenditure by the households.69 In 2001, 68% of U.S. households where homeowners and their housing equity accounts for 31% of its totals 66 67 Seppo Laakso, (1997), Urban Housing Prices and the Demand for Housing Characteristics. Pp19 p21 68 Steven C. Bourassa, Martin Hoesli, and Jian Sun (2006), “The Price of Aesthtic Externalities” TheAppraisal Journal. 69 Mikael Attenhög s4 18 Chapter 3 APPRAISAL AND VALUE FRAMEWORK net wealth. The researchers state that households hold large amounts of undiversified real estate.70 Location is fixed and the market considered thin because normally there may only be a few housing units for a certain type of households available in the market. It is a situation of asymmetric information because buyers and sellers do not normally have the same amount of information about the hosing units in the market. The transaction cost consisting of search cost, removal cost, repair cost and broker costs are high. ”The price impacts of attributes depend on the supply and demand for these attributes. When changes in demand occur, the price of attributes whose supply is limited should change; where as the price of elastic attributes should be relatively fixed. In the context of real estate valuation models, the price of the former attributes should move with the real estate cycle, and the price of the latter attributes should remain by a large constant (in real terms). Generally speaking, one would expect variables related to location and land values to be relatively inelastic, while factors affecting the value of structure should be more elastic.”71The construction period of new hosing is long and also controlled by the government. The short run supply is very inelastic and the volume of residential buildings completed in one year is 1-3 percent of the stock72. This means that the supply consists mainly in the secondary market and that the households act both as seller and buyers in the market. Finally there are various forms of housing to choose among and the focus in this thesis is a special type of apartments. 3.5 The market for apartments in a political view Politics about housing is an important part in the society; the right of a place to live in along with the right to education etc is regarded as human rights in the western world. In Sweden between 1950-1970 a new set of housing was built and the society provided stimulation to the actors in the market. Everyone should be able to rent a minimum standard apartment. After this period Sweden had an area/inhabit among the highest in the world, the previous problems of finding a home did not exist any more. At the same time many “bad” (bad is highlighted because I wanted to clarify that it’s someone else subjective view) old apartments was destroyed. About 100.000 apartments per year were built during that period and 50.000 in 80th and 15.00 in 90th. The stimulation by government has been taken away and project that is believed to be profitable nowadays are high standard apartments in good location.73 In the 90th there were big changes in the housing market for apartments, a lot of rent apartments were sold out and became apartments with tenant ownership. This massive transform of the market can particularly be found in the Stockholm area and the highest willingness to buy is in the center.74 Those who could afford to buy is said to be the winner in this reform.75 70 G. Donald Jud, PhD, Stephen E. Roulac, PhD, Daniel T. Winkler, PhD (2005), Evaluating the Risk of Housing Investment” The Appraisal Journal 71 Steven C. Bourassa, Martin Hoesli, and Jian Sun (2006), “The Price of Aesthtic Externalities” TheAppraisal Journal, Pp2. 72 seppo p 24 73 Catarina Tholin Framtidens bostadsfinansiering (1997) 74 Kerstin Dodström mfl. (2002) Allmän nytta eller egen nytta 75 Kerstin Dodström mfl. (2002) Allmän nytta eller egen nytta 19 Real Estate Apprisal Thesis Segregation in the housing market is from a society point of view regarded as negative. The political goal is to move from the situation today with concentration of poverty towards integration in the housing markets.76 The political focus has gone from the focus of producing apartments to control for segregation.77 Worth mentioning is that the average person in Sweden has a housing area of 47 square meter.78 3.6 Market of apartments If you can afford you have the choice of renting or buying your apartment. To some extent these are competing alternatives. “...Some households may rent their first household and own a second one as a way of investing in the housing market”79. Competition can be direct or indirect depending on the degree of comparability. New research shows that “Apartment housing is not a homogenous product. There are two aspects of apartment’s heterogeneity. A given geographic area can contain a combination of new and existing apartments. All apartment units in a specific geographic area are substitutes for each other to some degree. They differ in their degree of substitutability. Depending on the characteristics of the subject property, the other apartment units are either direct competition (near “perfect” substitutes) or competition of lesser degree.”80 3.6.1 Rent on apartments In Sweden the rent levels of apartments is strictly controlled and set according to a system called “Bruksvärdesystemet”. A typical rent is determined and actors in the market set their rents in relation to that. The purpose with the system was that to reflect market rents and to smoothen out rent levels from fluctuations in the markets. This system has been widely debated. It is criticized off creating to high rents in unpopular areas with vacancies as a result and to low rent levels in popular locations. Location and rent is normally regarded to be closely related81. According to the system, apartment with high standard must have a rent close to an apartment with low standard, which makes the property owner unwilling to invest in maintenances and standard. 82 In an international perspective the rent levels in Sweden are regarded as high and according to the EU average rent, Sweden rents are 32% higher. 83 In my view I believe we have an average higher standard and also high cost of heating in the winter that explains the higher rent level. In the future there is a possibility that increased competition in rent levels could lower the average rent in Sweden. 76 77 Eva Andersson mfl (1998) Boendesegeration i de nordiska huvudstadsregionerna. Catarina Tholin Framtidens bostadsfinansiering (1997) 78 79 Catarina Tholin (1997) p 23 Michael Ball (2005) The second Home Boom, The Appraisal Journal 80 Joseph S. Rabianski, PhD, (2006) “Apartment Market Area Delineation” The Appraisal Journal 81 LMV 2004 s 107-108 82 Milkael Atterhög (2003) 83 s4 20 Chapter 3 APPRAISAL AND VALUE FRAMEWORK 3.6.2 Tenant ownership of apartments In Sweden it is not possible to fully own your apartment in contrast to most of the other countries in Europe. The special form of ownership is called tenant ownership, the housing association or co-operative owns the building / buildings in questions and the individuals are members in the housing association. Thereby, they collectively own the apartments but with a “right” (bostadsrätt) to use a particular apparent. This “right” can be both and sold on the market and in practice the individuals’ feel like there are owners of the particular apartment. The market has looked been this since 1930 and the housing associations consist in different forms and it may belong to something else, they are all separate economic units. A single housing association is controlling from three to several thousand apartments.84 The owner of a tenant ownership pays a “rent” or fee to the housing association. The level of this rent but also the housing association itself and its debts is affecting the value of the ownership. 85 84 85 Göran Olsson (2003) Välja Bostadsrätt s9-13 Göran Olsson (2003) Välja Bostadsrätt s9-13 21 Real Estate Apprisal Thesis 4 TO AFFECT THE OUTCOME Chapter 3 appraisal and value framework has showed that there are many factors affecting the outcome of the selling of the tenant ownership. The actual market situation, interests and business cycle and factor specific to the object such as, location, the economy of the association and the rent are unique factors, which cannot be changed by the owner of the contract. The presentation of these factors differs and affects the value. They can be said to be more or less dependent on the broker. Also temporarily or permanently changes can be made on the apartment to affect the outcome. Now the focus turns to individual preferences, the demand for apartments. Homestyling and homestaging is said to affect the value but how and why you may wonder? 4.1 Preferences about housing qualities This section is about preference of segments of different individuals in the market; aggregate preference can be described as the demand in the market. The first part is based on the conclusion of Inga Britt Werner research paper from 2003. The survey is done in the Stockholm area but the results is said to reflect preferences in big city’s in comparison to small cities where the variety of housing is limited. The interviewed brokers gave a picture of a relative problem free situation in the housing market. Almost every change of housing is as a result of a change in life situation. When people grow up they come to a point where they move from their home, they educate and create new families. The original families are breaking up and the old are people are left in the old family homes that eventually do not have the strength to stay. 86 LIFE CYCLE LIFE FORM LIFE STYLE Demographic and social factors Attitudes and values Young - Old Excitement - Security Man - Woman Masculine - Feminine Children - No Children Family oriented - Individualistic High education - Low education Work as living – Work as salary High income - Low income Fulfill a dream – Accept circumstances City – Countryside/Village Urban – Close to nature Figure: Factors controlling housing preferences Source: Inga Britt Werner research paper 2003 s52 Inga Britt Werner have sort out eight customer types: 1. Young. Young high-educated urban individualists, their present income is low but they are convinced that they will have good economy in the future. This group has a high demand for central location, sauna, nice view, large balcony, high speed internet etc and will not be satisfied with a standard housing. These are unrealistic demands at 86 50 22 Chapter 4 TO AFFECT THE OUTCOME their present income situation and they have to settle with less and at this point their value center location highest, and thereby have to live in very small apartments.87 2. Young families with a demand for a house Young couples with or without children want to live in a house. They often settle with an apartment but with the number of children the demand for a house increases. This category has low income and now they rent their apartments located in the suburbs. This group is willing to move from the city, if they can get jobs.88 3. Families with local social connections This group is almost the same as the previous but differs in the way that they have a strong social connection of friends and family in a certain area in the city, and is less likely to move from that area. In this group there are also families with one ore many children, but only one parent who relays of the help of relatives to look after children etc. 89 4. Double high income Adult couples with or without children where both partners have high income. They value their time high and priorities work, themselves and quality time out of work. It’s often persons from group 1 that later in the life cycle come to belong to this group. Before children come in the picture they want to live in the city center and enjoy culture, restaurants and shopping. They typically buy their apartments and later on use the capital to buy a house in the city a more exclusive apartment or alternatively a new build apartment.90 5. After the divorce This group has no typical characteristics like the other groups; divorces are common in every social level. What they have in common is that in an emotional difficult situation, people need to find new places to live, often with a demand for a close location in relation to each other. In that way, the shared custom of the children runs smoothly. Also of importance is the location in relation to the children’s kindergarten or school.91 6. People who lives alone Adults and older people who live alone is a growing group. This group has a majority of women and they demand a one ore two room apartment in the city and value culture high. The men in this group prefer living in the city but can accept the suburbs and value the availability of nearby parking high.92 7. The middle-aged The middle-aged and older couple that sells their house is the favorite group by building companies. They have capital to spend on a more comfortable way of living and don’t have the strength or lust to spend time servicing the house or the lot. They 87 88 p54 p55 89 p56 90 p57 91 p58 92 p.59 23 Real Estate Apprisal Thesis are offered to buy three or four room apartments, in central location, often with sea view through big windows, exclusive materials, big bathrooms and small not practical kitchens. Alternatively the capital is used for other things, many choose to live in other countries part of the year.93 8. Old Peoples For old people living is about security and eventually it will come to be about care. For them there are various forms of housing and service to choose among. The elderly want to be close to daily service and to have secure walking roads. They value a view of something to look at; a park, center, street or even a busy road can be interesting to watch.94 The conclusions about the preferences are in line with other researchers. In a preference study by SABO, there was a discussion about housing as a symbol for the individuals and in media, housing is described as a symbol for success. The study showed a small proportion with personal interest of home decoration.95 Inga Britt Werner states that there are examples in both interviews and questioners that home decoration is of great interest for many; she also says that this interest is highly affecting the preferences.96 This leads me to the thoughts that the picture in media of homestyling and homestaging is probably affecting the preferences and vice versa. 4.2 The Picture in Media of Homestyling and Homestaging Homestyling and homestaging are arrangements to housing in a selling situation in order to achieve a higher selling price. While homestaging is refereed to be temporary in nature homestyling is wider and also to include permanent changes. The words are often used as synonyms in media and the phenomenon comes from USA and GB. In organized ways it can nowadays particular be seen in big city’s. The principle of homestaging is to create a stage for visions, imaginations and interpretation and not to cover for defaults. This is done so people can see how a particular object can become their home.97 The difficult thing with homestyling is to find the balance, the dwelling can’t be too personal but it shall still give a cozy feeling. 98 The picture in media is that the price effect of homestyling/ staging is stated to be 10% or 8-12% but there are never any reliable sources to the figures. Carl Grefberg a business economist states that it’s no scientifically proof for the effect of homestyling and staging.99 I found statistics on the internet supporting those numbers mentioned but they are done and provided by the homestyling /staging companies and is to be considered as non reliable sources, a collection of statistics can be found in www. Homestaging.com. 93 94 s60 s61 95 SABO Ekeblad, 1997 96 s 62 97 Nina Weckström Huvudstabladet (06-02-18) 98 Jessica Backlund Nyhetsbyrån PM (06-02-09) 99 Carl Grefberg Dagens Industri (05-12-16) 24 Chapter 4 TO AFFECT THE OUTCOME  “Töm och Göm” Empty and hide the apartment from all unnecessary things that have been collected during the years. Says Carolina Löwgren the interior designer famous from the television show Homestyling 100 “I have seen evidence many times that homestyling works, it gives around ten times the money that you put in” says Lulu Carter who beside the television show Äntligen Hemma work as an interior designer.101 Sometimes the customers also buy the furniture and even the flowers.102 Even the buyers is getting familiar with the homestaging techniques and is getting suspicious and sometimes speaks negative about it but in those occasions that haven’t affected the selling price negative says, Mäklarsamfundets VD Lars Kilander103    The cost for homestaging and styling from a set of different sources varies from about 2000 – 5000 for personal consulting of an object but then you have to do the work yourself, and 5000- 100000 for full service and rental of furniture. I’ve also seen a company that takes their fee in a provision percentage of the difference of final selling price and the initial price set by the broker. I have found fourteen registered companies in Sweden that have their core competence in homestyling or homestaging. There are several companies that have division for staging / styling purpose and the brokers can recommend and provide contacts. 4.3 The price is often determined by a bid process. In Sweden a bid process sets the price on apartments in centre location. In contrast in Helsinki the brokers set the prices relatively high so that the typical price is below the original price set by the broker. 104 The condition of sale is factors affecting the price examples are unusual pressures or poorly informed buyer or seller.105 It can be worth knowing that the bid process is not definite and bidders can drop out from their bids. Situations with false, fake bidders can occur. Several bid processes with false bidders in the market have been unveiled for example in an episode of a Swedish Television show called EFTERLYST. After that the brokers involved lost their jobs for not being serious. The price of the apartment is juridical set when the seller and the buyer sign the contract, up to that point the prices is regarded as preliminary. It also worth mentioning that the seller has the final saying of to whom and at what price he or she wants to sell, not the broker. There are 100 101 Sara Åkesson Afftonbladet (05-11-16) Therese Nyberg Nyhetsbyrån TT Spektra (06-03-08) 102 Lennart Hagberg Afftonbladet (05-11-16) 103 Per söderström Svenska Dagbladet (05-12-03) 104 seppo laakso 105 Jaffe & Sirmanson 1995.316 25 Real Estate Apprisal Thesis various types of bid process which I will not go into, I just want to mention a new form called e-bids in www.e-bud.nu you have to be a registered member to watch and place bids.106 Five brokers give tips for both buyers and sellers 107 Lars Engelbert CEO Bjurfors. Buyer – How to win a bid process: If your limit is two million, set it ten thousand higher because it’s likely that others limits also are two million. Seller – How to maximize the selling price: homestaging it works, examine and describe possibilities with build-permits, balcony, fireplace etc. Measure the apartment, 60% of the apartments in Stockholm are wrong, most of them to small. Erik Chalborg Owner of Svensk fastighetsförmedling södermalm. Buyer – How to win a bid process: Have your finance ready, be active. Seller – How to maximize the selling price: He gives examples of different homestyling arrangements. Kaj Wirsén Head of the Stockholm region of föreningssparbankens fastighetsbyrå. Buyer – How to win a bid process: Decide what you want to pay and be quick in the bidding process. Seller – How to maximize the selling price: -Make a homestyling. When people have lived in their apartments for a long period of time there is simply too many furniture. Ulf Nordström broker Notar Lidingö. Buyer – How to win a bid process: don’t say 1990000 say two million, which probably is the limit of many other bidders. Be active at the beginning of the weak then you lose many other bidders at an early stage. Seller – How to maximize the selling price: cleaning and homestyling as well as presenting pictures of the outside nearby environment and presenting the area drawing off the apartment. Anders Alf Head of Södermäklarna Södermalm. Buyer – How to win a bid process: Put a high bid at the beginning to scare away other bidders, put 100000 extra in the city and 10000 in the suburbs. Decide in which apartment you want to live in and do not take part in many bidding processes at the same time. Seller – How to maximize the selling price: Homestaging especially if the apartment is in bad condition. Empty the apartment since the biggest problem is that people in general have to many things. 4.4 Price effects of specific quality. The same researcher that studies preferences off the buyers has studied the price effects of architectural quality. Inga Britt Werner conclusion was that the price effect of the architectural quality of apartments with tenant ownership accounts for about 10-12% of the value in general. The biggest part of the value comes from the first three points (se beneath)108. This is in line with my literature study. 106 107 Göran s 14 Lenart Kavsvi Aftonbladet (05-05-09) 108 ´Spelar Kvalitet någon roll för priset? Pp128 26 Chapter 4 TO AFFECT THE OUTCOME     Location in all its respects for example type of neighborhood, quality of services, communication Type of dwelling, number of rooms Monthly rent or payment to the co-operative The specific quality of the consider dwelling, where of architectural quality is one part. Her study also showed that residents tend to like older building and dislike much of what have been built during the 80th and 90th. The open layout and their being well lit do not cover for the criticism of poor detailing and flooring. “Here is consequently a great challenge and possibility of design development open to architects, builders and producers of building materials alike”109 4.5 Marketing theory of Branding “Likewise credit cards and houses speak to us; for example security, harmony or success.”110 This personification of housing can be compared with the picture by the home stagers the selling objects gets a personality that matches with the group of buyers. Jessica Evert Tilly a graduate student in marketing from Stockholm school of business has written a thesis about homestaging and adapted marketing theory of branding to the topic. I found the study very interesting and made a summery of the highlights from her theory chapter. Her conclusion was if homestaging have an effect on price, which she found out that it had, but the real question remains unanswered; is it worth the efforts? According to theory of branding, a brand has an identity.111 The value of the brand can be so strong that the user conceives unique extra values that satisfy his or her needs. 112 Value doesn’t have to be related to the product. Attributes that aren’t related to the product are for example the color, package and who sells the product and in what conditions.113 The brandpersonality is a non-product related attribute. Personality can be defined as characteristics patterns of thoughts, emotions and behavior that describe an individual’s personal style and how it integrates with its physical and social environment.114 A brand like us humans can get a personality. The personality reflects how a person feels about the product, if it’s the persons “type of product” or even “friendship” with the product can occur.115 The personality of the brand reflects a relationship with the characteristics of the product that the buyer has or wants to have. A brand can stand for status, an enhance image or a privileged lifestyle in this way the value of having the product have a value itself.116 The presence of a brand can show who a person is in relation to others, and the definition can be of great importance to the person in a group of social belonging.117 109 110 ´Spelar Kvalitet någon roll för priset? Pp140 Alain de Botton Svenska Dagbladet (04-10-31) 111 Lagren, H 1998 s 52 112 Tuominen, P. 1995 s 6 113 Keller, K L. 1998 pp95 114 Atkinson et al 1996, pp 421 115 Keller 1998 s 97 116 Tuominen, P. 1995, pp 7 117 A D. 1996, pp156 27 Real Estate Apprisal Thesis Although many people think different, favorable looks is important for persons to like others. Research has showed that physical attractive persons are more likely to be appreciated by his or her surroundings. Cute children’s is believed to be nicer then children’s with a less favored look.118 The phenomenon when a positive characteristic is dominating whom a person is percept by its surroundings is called “halo effect”.119 This effect can automatically give a product many positive characteristics drowned from the original.120 Except from the attraction from physical attractive attributes, the humans being likes what he or she recognizes. The result is that alternatives that are recognized automatically are in a favored position in a decision situation. In experiment people have been given both original and a mirror pictures of them self their partner and their friends. The pictures of themselves were preferred in the mirror version while their partner and their friends preferred the original, what’s recognized is favored.121 People also like things that are similar to themselves, similarities in backgrounds such as class, age, raze or physical similarities such as length hair or eye color. Couple relationships that have common characteristics tend to last longer.122 118 119 Atkinson et al. 1996 pp 614 Cialdini, RB. 1993, pp140 120 Mowen, J. et al. 2001, pp124 121 Cialdini, R B. 1993, pp146 122 Atkinson et al. 1996, pp 617 28 Chapter 5 EMPIRICAL FINDINGS AND ANALYSE 5 EMPIRICAL FINDINGS AND ANALYSE. 5.1 Broakers Stefan Rehler 38år båtikschef Plåt och svetsmekaniker -En vecka Mäklarutbildning 4mån Jobbat sen-92 Sedan 95på svensk fastighetsförmedling Föreningar kommer att spärra personer som köper och säljer lägenheter Jobbar lokalt Jobbar med jämförande värdering och fingertopps känsla. Gan fort när han kommer in i en lägenhet bestämma värdet tack vare erfarenhet. 5.2 Appraisal of apartments An apartment is appraised with the location price method ”Ortprismetoden”. Stefan Rehler says that there is a local difference that makes it extremely hard to value apartments outside the area the broker has experience in. The estimate would of course give a rough idea of the value but not with a feeling the expected outcome or a more precise estimate of the price interval. The housing association is valued with economic calculation of value through their accountings. I believe that a housing association with a monthly fee large enough to reducing its loans will receive a higher price development. Compared with one that has a monthly fee only accounts for deprecations and other charges, this shouldn’t be true according to the future returns valuation method, since the benefits of ownership should be the same in both situations. If one were to calculate a production cost of reproducing the apartmen,t in able to compare it with the valuation done by the broker; you would probably end up with a higher value regarding the fact that very few new apartments is built today. The reproduction cost is higher than the value of the existing stock, but on the other hand the standard might by lower. What’s typical for older building is that they consist of handcrafted detailing, while new ones typical is build in a more industrialised building procedure which make comparison complicated. Stefan Rehler defines value as set by a market. “Market value is the value a customer is prepared to pay for a specific apartment at a specific time, this value change according to weak of sell and present type of available customer”. He has a typical example of a recent sold apartment on “Nordensgatan”. This apartment was put out with an asked price of 1495000 Sec and went up to 1800000 in the bid process. The affair was cancelled by the bidder, was put out for sale again and finally sold for 1880000. A while after, another apartment with the same qualities was for sale with the asked price of 1595000. Since there were no prospective buyers, the apartment sold for 1495000. Stefan Rehler has long 29 Real Estate Apprisal Thesis experience of the difficulties in setting prices, regarding the nature of the market, rapidly changing from time to time. He states that is extremely difficult to determine what price to ask. I interpret his example as market inefficiency in extension of the inefficiency provided by the high transaction costs in the market since it’s the same transaction costs in the example. All the definitions of market value I’ve provided in the theoretical chapter doesn’t take into account, market inefficiency the example shows a situation of an incomplete market. ROA Real Option Analysis is not familiar to brokers and Stefan Rehler had never heard about it. Brokers talks about opportunities with possible building permits such as the building of balcony and fireplaces. Stefan Rehler saw an opportunity if the attic could be turned into apartments. I believe that ROA suites this type of situation both by developing a different way of thinking and the practical calculations of the future opportunities. 5.3 What determines value Stefan Rehler states that the location is the number one most important factor determining the value. The second one is the economy of the housing association and the third one is the fee. And says that the other things you can change as you please and it’s easy to agree on his statement. He further states that the number of prospective buyers is of great importance for the outcome. Timing is important. He makes an example that smaller apartments with one room have a peak demand in July. When conducting the valuation the broker gives an idea of the value span and the expected outcome. The broker also recommends the seller a set price, but it’s the seller that makes the deceptions. Stefan Rehler says that there has been a debate accusing the brokers of putting out the apartments fairly low to attract many potential bidders. He also states that they have tried to but higher selling prices since the pressure from the buyer have been very strong lately and explains that the bidding processes is very time consuming for the broker involved. When counting together all the telephone calls in the bidding process takes a whole working day. 5.4 Location The prices are always highest in the centre of the city, says Stefan Rehler. Then, like circles in the water, the prices reduce. The model is accurate according to Stefan Rehler and makes an example of the situation in Gothenburg. He claims that there are about 7000 students that queue for apartments in the centre of the city when there are plenty of empty apartments in Angered, suburb of Gothenburg that nobody wants to live in. Prices of apartments with tenant ownership in Gothenburg Market divided by location. Kronor per sq.m 30 Chapter 5 EMPIRICAL FINDINGS AND ANALYSE Mar 04 May 04 Nov 04 Jan 05 Mar 05 May 05 Nov 05 Jan 05 Mar 05 May 06 Month Gothenburg Center Gothenburg North East Gothenburg West Gothenburg East Hisingen Source: www.maklarstatistik.se 5.5 Price effect of view etc The price of aesthetic externalities in the most recent research found that houses that boarder to forest ads 19-35% on selling prices. Houses with water frontage ads premiums of 89.9147% and houses with ocean view ads32%, and partial ocean view ads10%.123 Stefan Rehler thinks that the figures is accurate and partly describes the situation but further states that the view is only one part of the picture. The view in, from the outside, along with the free space is the other part, and is generally valued high since Swedes is concerned about their privacy. A view of the town is also valued high by the same reasons. In Gothenburg, the demand for sea view is very high and probably accounts for about twice the selling prise says Stefan Rehler. When he apprise a apartment he make an estimate of the view along with the other attributes of the apartment and by experience he determines the value and give his customer a price span. Lets say that the customer can expect to receive something between 1 500 000 and 1 700 000. The apartment is then typical put out to a sell price around 1550000. It’s up to the buyers to determine how they value the attributes and in the extended view they determine the outcome. He don’t know about the price elasticity and states that the prises moves in changing patterns. One sure pattern is according to Stefan Rehler that if “you are about to sell you house with frontage to a beach in May you will receive a significant higher selling price compered if you were about to sell it in December with a snowstorm”. He’s point is that the view is the same and it’s more to it and states that its all about the feelings that occurs in individuals on the day that the apartment is on display and I fully agree with him. 123 Steven C. Bourassa, Martin Hoesli, and Jian Sun (2006), “The Price of Aesthetic Externalities” The Appraisal Journal. 31 Real Estate Apprisal Thesis 1.6 The Gothenburg market for apartments. The Gothenburg market of apartment is hot says Stefan, the market is attractive but the prices doesn’t rise at the moment. There is still a big demand and there are a lot of people on the displays of the apartments. The market has been changed, three year ago homestyling started to become popular. Other changes is, when I started in the beginnings of the 90th the loan interest rise to 500% and at that time there we hadn’t many buyers. The new production of apartment is very limited and dos not affect the market of the existing stock. The new production companies sell their apartments themselves but an example from Stefan area of expertise is the new production on Värmlandsgatan, the price development there is very poorly and now a couple of years latter they just get a little more then what they paid, Its seams to be a tuff business building new apartment in the economic situation today. I mention the transformation of rental contract to tenant ownership in Stockholm and Stefan states that the situation is the same in the Gothenburg region. The street Linnégatan, for example, has been reorganised. But the reorganisation haven’t been affected the market was Stefan first reaction. He future states that it’s not affected in a negative way. What has happen is that there is a lager turnover when it comes to apartments. People that have been living in rental apartments have suddenly money to either move to some other apartment or to buy a house. They have get a very good price deal, but the ones who ”loose” in this case are the one who cannot afford the initial payment. In the previous chapter I wrote basically the same thing; those who could afford to buy is said to be the winner in this reform.124 There is barely any production of rental apartments nowadays; the main production is tenant apartments. The focus is to build at the outer edges of the town, rather than in the city centre. Kungsten is a residential area that in built in that sort of way. When the industries are closing down, the ground is a perfect place to build on, and new apartments are built. The use of Internet is a popular way to look after apartments. The most popular apartments are one room-apartments, two-room –apartments, and three-room-apartments. Nine of ten of the people, who have seen us, have find us at internet. Four-and five-room-apartments is more common among the sixty-year-old people who still look at the papers-ads. It’s hard competition; there are five or six very big participants in the market for apartment with tenant ownership. There are very hard to get a rental apartment, it’s at least 30 year of waiting! So they might not be good substitutes in the market for apartment. The "Brukvärdessystemet" is of little interest to Stefan that states that is good if ordinary peoples can afford to live in the cities as well, but is it working like that you may wonder? Stefan doesn’t think that the system leads to poorer standard off the apartments and the buildings since the owner has a huge capital value that needs maintenance to sustain He says that it would be smart to skip maintenance from a economical point of view and I agree on the cases of functionality changes but not on the chancing of esthetical material such as flouring etc, even thou we have laws regulating this I still think there is room for subjective argumentation. 124 Kerstin Dodström mfl. (2002) Allmän nytta eller egen nytta 32 Chapter 5 EMPIRICAL FINDINGS AND ANALYSE “The bidding is nothing you create; that is depending on how many clients there is who is interested in the apartment. Our goal is not to create this sort of bidding. What we are doing is that we try to prepare the apartment as much as we can before an apartment display. We’re working with stylists and cleaning the apartment so it’s come to its best. Our goal is that the client gets the best picture possible of the apartment when they are coming and looking at it. The best thing is when the client already have look at the apartment at internet so he/she know beforehand how it looks; that saving a lot of time, both for me and the client! “ Prices of apartments with tenant ownership in Gothenburg (1996-2005). Kronor per sq.m. (kvadratmeter) Year Source: www.maklarstatistik.se “Why did the market go up with 37%?” “Demand, Demand, Demand because of the high demand” But Stefan doesn’t think that the high development will continue any more. It will stagnate ant then slowly depreciate in the speed of the interest rates. Those prises we have today cant possible sustain with a dubbed level of the rates. In a longer perspective the cost of the housing associations increases and also their related fee levels. About the elasesy on the market Stefan believe it’s wise to have an apartment in an attractive location His prediction is that if the marked depreciates by 10-12% in the god location in linnéstan, it will probably depreciate by 20-25% in majorna and kungsladugård. 5.6 Homestyling and Homestaging Stefan says that he wouldn’t have sold a car without washing it first, and with 500 p-notes in it and means why should you think different when selling a apartment. Exactly the same point is made in the brochure for sellers provided by Bjurfors wen they valued my apartment. Stefan also point out that it not to try to hide defects or to show that the apartment is better then it is and says “We give the client a perspective of what you really can do with the apartment, you doesn’t live that way”. This is in line with the statement: the principle of 33 Real Estate Apprisal Thesis homestaging is to create a stage for visions, imaginations and interpretation and not to cover for defaults. This is done so people can se how a particular object can become their home.125 To fresh up, kitchen and bathroom otherwise if it’s very damaged is generally to expensive and not recommend by Svenska Fastighetsmäklarna for example to change tile is far too expensive according to Stefan. When hiss asked to give a example when homestaging is most profitable he says: “a hardworking couple with three kids who have many toys in the whole apartment and pets etc”. To higher the standard of apartments in a profitable way mostly concerns repainting and fixing up things that is broke or in poor condition. Paint your apartment in a light colour and the customers’ value letting in daylight high. All three-broker firms that I investigated offer services by professional stylist to their customers. Stefan says that at least 10-12% can be ascribing to homestyling and homestaging procedures. He also think that apartment built in the last 30years is of poor surface quality with plastic Carpets in the whole apartments and agrees on in those occasions is definitely worth the money and can also be profitable to change surface material. Personlighet. Ja verkligen säg en personlig stil vi sålde en lägenhet här där allt var utrivet och omgjort här tyckte folk att den var personligt inredd för henne… allting var väldigt smakfullt och ja det fans en tanke med allting. Stefan mentions an example of a apartment they sold where everything was torn out and undone. People thought it was personally designed just for her. Everything was very tasteful and there was a thought with everything. She had caused something that people like. Then there are people that don’t want to buy ready-made thing; they prefer to put they own touch on things and says no directly. In that example Stefan believed she made a profit on the work. He believes that if an apartment has been ascribe to a image, that attract the same image. That is inline with the marketing theories of branding. Stefan describes a negative HALO EFFECT “The most important thing in a apartment is the hall. That is the first thing you remember when you enter an apartment, and that is the last thing you see when you went out. If you get a bad feeling in the hall, then the whole impression of the whole apartment is tainted. Many people made up their minds already in the hall. Investigations has prove that the human brain is made up the mind in about 10 seconds.” This is in line with the theoretical findings I provide. Halo Effects can be seen in the hole apartment as well and even to the pictures in the internet says Stefan. According to Melissa its Important that the customer always is surprised positive not negative, the picture on Internet should give a accurate picture of the apartment. “Do you think that he Halo Effects accounts for higher selling prices?” “No, you are looking at everything in the apartment before you’ll buy, it’s such a big business buying an apartment.” He thinks a vile and doesn’t looks to sure about his statement anymore and says, “at least I hope that people do” 125 Nina Weckström Huvudstabladet (06-02-18) 34 Chapter 5 EMPIRICAL FINDINGS AND ANALYSE ”Do you think the purchaser buying things they recognise? ” “Yes, the way you style your home is very personally. Some people hate it, while other people loves it! And the people who loves is gets a more positive picture than the others, of course!” 5.7 The Biddings ”Some biddings have really reached a very high level, and at that moment you have to say to your client that the apartment is very expensive. You really have to explain that the apartment is really expensive and that the buyer has to consider if it’s worth buying. You tell the client what similar apartments here have been sold for. There are really people that nearly buying apartments way too expensive, more than they can pay. And you have to stop people from doing that, I need to do that almost every day!” We are doing calculations on our customers, and when they are reaching the limit of what they can bear economically we have to tell them, and suggest that they are consider a cheaper one or consider another district. There could be an idea to buy a larger apartment in a less popular district that is a bit cheaper, that to buy a small one-room-apartment in a more attractive district that is more expensive. And if the market goes down, you don’t have to sell the apartment! ”But if the costumer have got a lot of money, is there still a reason to stop him from bidding to high?” No, or yes, there actually are! We are quite big so we have to think in a long-term. We caring about our customers and have the customer paid half a million too much, he/she going to find it out sooner or later and then getting a negative attitude to us. We need to get him/her back the day he/she wants to sell the apartment. Then it’s better to stop him/her in a early stage. We also inform the seller when the bidding is taking off in the wrong direction that we really have to stop it before is going way too far. Otherwise we all going to end up in a bad situation when everybody start dropping off their bids because they realise the bidding process went to far. And no one wants to sign the contract in the end. We have to work in long-term direction, not just think what’s best at the moment. Many agents is working in this kind of way, you really have to do that if you want to keep your job. And the customers are really grateful when you are stopping them when they are about to buy a too expensive apartment! 5.8 The experiment Recently an a next door neighbour of mine sold his apartment whit exactly the same drawing facing the same view from the same floor witch makes it perfect for comparison. When I bought mine two years ago it had about the same poor standard that the on for sell in May 06 to the price of 695000. When I bought mine I chose between three different apartments of the same size in the same housing association all to the price 595000. Mine went up to 665000 in the followed bidding process and I have now done work to higher the standard. From plastic carpets, old kitchen and bathroom to stone and three flooring and new kitchen and bathroom. 35 Chapter 6 CONCLUSION 6 CONCLUSION To enhancing the understanding of the situation in general and particularly in central Gothenburg I eventually stipulated my Research question; “how do brokers reason when they appraise apartments with tenant ownership in Gothenburg, and what do they believe is to determine the outcome of the followed bid processes?” By collecting facts and qualities about appraisal, value of real estates in general and apartments with tenant ownership, particularly glancing at the reality in Gothenburg. I fulfill my purpose to provide an overall picture of the appraisal and value phenomenon with a special interest in apartments with tenant ownership. Apartments are appraised by experience with the location price method ”Ortprismetoden”. The reproduction cost is higher than the value of the existing stock. Market inefficiency, an example shows a situation of an incomplete market. There are practical examples of ROA Real Option Analysis in the real estate market but no one seems to think of it in those terms. Number one location, two the association, three the fee Other factor that determines the value is timing and the number off potential buyers, two sides of the same coin that affect the outcome of the selling. It’s in the interest of the broker’s to reduce the bidding procedures perhaps an electronic bidding system is the solution that also comes with possibilities of govern. Price effect of view, or of what? The view in, and free space around the apartment is valued high along with a nice view out. It’s the feelings of the attributes that affect the outcome of the selling. A too high selling price in the bidding is not a good thing for the brokers At least not to the ones with a long time perspective. I believe that psychological and emotional aspect such as” If you find what you are looking for, you are prepared to pay almost anything to get it” is explaining the behaviours in the market for apartments with tenant ownership, in an extension to the economic rational behaviour. “What goes up comes down” and eventually market prices stabilises again, the real question is obviously what is the steady growth rate in the long run? And those of us who live can tell. The figure shows steady growth rate the last ten years. The comparing approach automatically comes with a risk. If the objects that are compered to, have a wrong value, then the valuation object automatically receives a wrong value. This implies that market values are wrong and I see a risk but also an opportunity by calculating values. If these values are wrong or right today, is not up to me to decide, It’s up to each and every buyer in a marketplace. To calculate the reproduction value it helps locking a the building of new apartments which is 37 Real Estate Apprisal Thesis very low, implying that the values on the existing stock is not to high at the present situation. The calculation misses out the “land rent” and we are back to market values but less inelastic values than market values of the buildings. I believe the development of the interest rates is to determine the development in the real estate market as it always has, more or less, but still. Finally, emotions changes so will the market. 6.1 Future research The “media circus” of homestyling and homestaging need reliable sources and this master thesis is a step in the direction of providing scientific findings for the effects of the new business. My work should be seen as a pre-study in the topic. A regression model is out of the scale and scope of this thesis but is certainly needed. Jessica Evert Tilly and Inga Britt Werner studies in the topic doesn’t take into account the cost of the procedures and thereby is of limited value, it shouldn’t be to hard to measure these cost. There is a lack of research in this field in Gothenburg in particular and in the topic in general. I hope that my facts and qualitative qualities of the phenomenon of the market in Gothenburg will come to serve as guidance for future quantitative and qualitative research. 38 Chapter 7 CRITERIA’S OF TRUTH 7 CRITERIA’S OF TRUTH Sample precision, reliability, validity and representatives are problems of quantitative methods while qualitative methods face other types of problems126 Karin Wideberg also cheers this opinion, she states that the terminology off the positivism dose not belong in the hermeneutic view of knowledge. 127 Just because something is described with numbers doesn’t necessarily means that its more true or more important128 Four criteria’s of truth that Maj-Britt Johansson Lindfors recommends regarding my study approach is validity, inter subjectivity, practical usage and systematic in data capturing129 These criteria’s is discussed to evaluate the fulfilment of the purpose and the credibility of the work. 130 7.1 Validity, Inter subjectivity, Practical usage Validity in this study concerns the amount off collected data and qualities that is captured with it, is the collected data valid for the study? Theoretical fulfilment regarding the appraisal and value framework is if new theoretical data would lead to differences. One cold naturally argue that a theory always is valid when its developed from a set of data but on the other hand one cold argue that the data set only includes limited amount of qualities, the theory is then thin.131 As stated this work is to be seen as a pre-study for further qualitative and quantitative research in the field. The literature study can somehow been seen as being well defined in the theoretical chapter (Appraisal and value framework) and to be of more subjective nature as a collection of thoughts and ideas in the next chapter (To affect the outcome). The empirical findings represent one perspective among others and are very limited. To what extent the individual is affected by what he had read rather then what he has experienced is hard to determine. I feel that I’ve capture some interesting qualities in the in deep interview with the broker that can be of usage to fellow students and others since this is the first work of its kind. Since I’ve done a large literature study I feel comfortable that these empirical qualities are unique. Cautions should be taking when interpret these qualitative, any kind of fulfilment is not reached in any way. The empirical finding does not necessarily represent brokers in general and should not be generalised. One problem with qualitative research is the difficulties to find the relationship of variables inner qualitative relations, how different phenomena’s effect and casual each other.132 I believe the only way to find out the effects of homestyling and homestaging is by regression analysis but before doing so it’s crucial to learn as much as possible about the phenomena to prevent misinterpretations and to determine what variables to test. Inter subjectivity is about the fit between interpretations and reality. One way to achieve a fit in this study would be to let the respondent examine my interpretations in the empirical work, however inter subjectivity can often be affected by individual feelings such as threat or flatter 126 127 Eneroth, 65. Widerberg, 24-31. 128 Holme och Solvang, 158. 129 Johansson-Lindfors, 160. 130 Johansson-Lindfors, 160. 131 Johansson-Lindfors, 165-166. 132 Eneroth, 64. Real Estate Apprisal Thesis if the interpretations is negative or positive.133 I have worked with the data very cheerfully and it’s very unlikely that I have made misinterpretations of the respondent. In one occasion it was impossible to hear what was said on the interview tape and in that case I had to contact the respondent and asked about it. I believe that the direct answer is the most accurate one in this type of interviews. The practical usage with this study is as mentioned to serve as a pre-study for further research in the field. This study is the first one of its kind and there is lots of work to be done. This collection of facts and qualities as well as the limited empirical findings from Gothenburg should be use as a starting point for further research. 7.2 Systematic in the data capturing. The problematic of credibility according to Eneroth is in the methodological chooses with data capturing and interpretations.134 The way the interview is done and the flexibility of the interviewer along with the degree of control is of great importance of what qualities that is discovered.135 The literature study was done to provide understanding of the problem area in general and methodological choices has been discussed and I have described my standpoints. This requires lots of extra work but it enhance the credibility. Finely I will let a metaphor describe the empirical data capture. I would like to compere the realty that I studied with a river. Since I stepped in to the river, it has changed. The place where I meet the respondent is gone and will never come back. The river is not the same, and what are left are only the circles on the water. By saying that I mean that my conclusions are built on data from the context of one respondent and one interviewer, they are locked in time and space. 133 134 Johansson-Lindfors, 166-167. Eneroth 135 Johansson-Lindfors, 168. 40 Reference list Wang, K. & Wolverton, M.L. (2004). Real Estate Valuation theory. Volume 8. Aprisal Institute, US. ISBN 0-7923-7663-3 Matzke, L. (2004). Home Staging. 1st edition, Center Stage Home. Tholin, C. (1997). Framtidens Bostadsfinansiering. Reväst . Göteborg. (Seminarierapport 1997:1) Andersson, E. Borgegård, L.E. Hjort, S. (1998) Boendesegregation i de nordiska huvudstadsregionerna. UmU Tryckeri, Umeå. ISBN 91-7191-430-7 Bodström, K. Ponzio, M. & Ramberg, K. (2002). Allmän nytta eller egen nytta?Elanders Skogs Grafiska. Malmö. ISBN 91-631-3286-9. Söderberg, B. (1999) Essays in Real Estate Appraisal. RIT Stockholm. ISBN 91-973776-1-9 Olsson, G. (2003) Välja Bostadsrätt. Nya Almquist & Wiksell Tryckeri AB. Uppsala. ISBN 917333-033-7 Dissertations Laakso, L. (1997). Urban Housing Prices and the Demand for Housing Characteristics. Tamper-Paino Oy, Tampere. ISBN 951-628-260-1 Attenhög, M. (2003). Vilka effekter har ökad konkurrens på bostadshyresmarknaden? Tryck & Media, Stockholm. ISBN 91-7323-043-X Werner, I. B. (2000). Spelar kvaliten någon roll för priset? KTH Stockholm Werner, I. B. (2003). Preferenser beträffande bostadskvaliteter. KTH Stockholm Methodological sources Reasurt articels G. Donald Jud, PhD, Stephen E. Roulac, PhD, Daniel T. Winkler, PhD (2005), Evaluating the Risk of Housing Investment” The Appraisal Journal. Steven C. Bourassa, Martin Hoesli, and Jian Sun (2006), “The Price of Aesthetic Externalities” The Appraisal Journal. Other sourses Articels Carl Grafberg. Business Economist (2005-12-16) Upplys alla husköpare om homestaging. Dagens Industri. Svenska Språkakademin. (2005-12-31) Årets nya Ord. Hufvudstadsbladet. Lars Gunnar Wolmesjö. (2006-04-17) Higher rates doesn’t cool off the housing market. Göteborgs Posten, Ekonomie. Internet sources Press massage. (2006-02-10). Bostadsrättsmarknaden i centrala Göteborg hetast i landet. www.maklarstatistik.se. www.centerstagehome.com www.lundin.se www.bjurfors.se www.svenskfastighetsformedling.se 10-12% Werner, I. B. (2003). Preferenser beträffande bostadskvaliteter. KTH Alain de Botton Svenska Dagbladet (04-10-31) 42 Appendix 1 INTERVJUMANUAL Bostadsrättsmarknaden i Göteborg Personlig profil -Namn -Ålder -Titel -Utbildning -Arbetslivserfarenhet Allmänt om värdering av bostadsrätter. (max 5min) - Berätta lite allmänt kring hur ni jobbar med värdering av bostadsrätter? - Kan du nämna någon större förändring av arbetssättet under din tid i yrket? Vilken värderingsmodell används? (ca 5min) - Vilken värderingsmodell används? Vad avgör priset på en bostadsrätt? (ca 5min) - Nämn de viktigaste faktorerna i ordningen viktigaste först och uppskatta vikten för slutpriset. Location models (max 5min) ”Location” modellen är 200 år gammal och Alonso (1964) utvecklade den modärna modellen som bygger på dessa antaganden.     The city is mono centric: It has one restricted Centrum, Central Business District (CBD), were work places are located. The transport system of the city is radial and dense in all directions. It is also free congestion. All transport is between homes and work places, which are located in the Centrum. The city is round. It is flat and similar in all directions. All lots are similar, except the size. There are no public goods ore externalities. - Hur förhåller du dig till dessa antaganden med din erfarenhet från värkligheten i Göteborg. - Vad är dina åsikter om modellen? - (Kände du igen modellen?) Hur prissätter du utsikt? (max 5min) En undersökning visar att tomter som avgränsar mot skog ökar priset med 19-35%. Med utgångspunkt i din egen erfarenhet vilket prispåslag i procent lägger du på lägenheter med anslutning och utsikt över skog. tex. slottsskogen och vilken effekt bedömer du att utsikten har haft på slutpriset vid sådana försäljningar? En annan undersökning påvisade ett premium på 89,9% för strandläge att jämföras med ytterligare en undersökning med pris påläggen 147% för strandläge, 32% för havsutsikt och 10% för delvis havsutsikt. Med utgångspunkt i din egen erfarenhet vilket prispåslag i procent lägger du på lägenheter med anslutning och utsikt över vatten, och vilken effekt bedömer du att utsikten har haft på slutpriset vid sådana försäljningar? - Hur resonerar du annars kring utsikten? - Hur tror du priset på utsikt rör sig i förhållande till marknadspriserna i allmänhet i Göteborg? Beskriv marknaden för lägenheter! (max 10min) - Beskriv marknaden för lägenheter! - Har marknaden förändrats i något avseende? -Varför tror du att priserna på bostadsrätter i centrala Göteborg steg mest i hela riket föregående år? - Framtidsutsikter? - Allmänt om utvecklingen på marknaden. Kundgrupper (ca 5min) Kan du efter din egen erfarenhet, dela in lägenhetsmarknaden i Göteborg i typiska kundgrupper och säg något av vad dessa efterfrågar? Beskriv hur du ser på home styling och home staging (Max10 min) - Fungerar det? - Vid vilka tillfällen fungerar det bäst? - Vilka renoveringsåtgärder och standard höjande åtgärder bedömer du vara lönsamma innan försäljning? - Kan en lägenhet ha en personlighet i sig? Beskriv? - En Halo effekt är när någonting positivt automatiskt leder till fler positiva saker. Anser du att sådana Halo effekter kan finnas vid en vissning? Ge ett exempel! Övrigt - Är det något övrigt du vill ta upp? 44 Appendix 2 INTERVJUMANUAL Bostadsrättsmarknaden i Göteborg Personlig profil -Namn -Ålder -Titel -Utbildning -Arbetslivserfarenhet Allmänt om värdering av bostadsrätter. (max 5min) - Berätta lite allmänt om värdering av bostadsrätter? - Kan du nämna någon större förändring av arbetssättet under din tid i yrket? Vilken värderingsmodell används? (ca 5min) - Vilken värderingsmodell används? - Hur stor dela av den bedömda värdet kan tillskrivas modellen? - Vad kommer denna tillämpning från? - Vilken är din inställning till beskriven modell? - Hur skulle du definiera begreppet värde? - ROA kan även användas på fastigheter. Extra värde genereras av framtida möjligheter. Kan du tänka dig och ge exempel på hur en kund köper en bostadsrätt idag och förväntar sig options premium av framtida möjligheter av att ha den? Vad avgör priset på en bostadsrätt? (ca 5min) - Nämn de viktigaste faktorerna i ordningen viktigaste först och uppskatta vikten för slutpriset.        Läget. Byggnaden. Föreningen och dennes ekonomie. Möjlighet att bygga balkong eller öppen spis etc. (ROA) Tidpunkten för försäljningen. Avgiften. Standarden. Location models (max 5min) ”Location” modellen är 200 år gammal och Alonso (1964) utvecklade den modärna modellen som bygger på dessa antaganden.     The city is mono centric: It has one restricted Centrum, Central Business District (CBD), were work places are located. The transport system of the city is radial and dense in all directions. It is also free congestion. All transport is between homes and work places, which are located in the Centrum. The city is round. It is flat and similar in all directions. All lots are similar, except the size. There are no public goods ore externalities. - Hur förhåller du dig till dessa antaganden med din erfarenhet från värkligheten i Göteborg. - Vad är dina åsikter om modellen? - (Känner du igen modellen?) Hur prissätter du utsikt? (max 5min) En undersökning visar att tomter som avgränsar mot skog ökar priset med 19-35%. Med utgångspunkt i din egen erfarenhet vilket prispåslag i procent lägger du på lägenheter med anslutning och utsikt över skog. T ex slottsskogen och vilken effekt bedömer du att utsikten har haft på slutpriset vid sådana försäljningar? En annan undersökning påvisade ett premium på 89,9% för strandläge att jämföras med ytterligare en undersökning med pris påläggen 147% för strandläge, 32% för havsutsikt och 10% för delvis havsutsikt. Med utgångspunkt i din egen erfarenhet vilket prispåslag i procent lägger du på lägenheter med anslutning och utsikt över vatten, och vilken effekt bedömer du att utsikten har haft på slutpriset vid sådana försäljningar? Hur resonerar du annars kring utsikten? Hur tror du priset på utsikt rör sig i förhållande till marknadspriserna i allmänhet i Göteborg? Beskriv marknaden för lägenheter! (max 10min) - Beskriv marknaden för lägenheter! - Har marknaden förändrats i något avseende? - Kan du nämna några politiska ageranden under din tid som mäklare som haft stor påverkan på marknaden för hyresrätter och bostadsrätter i Göteborg? - Vilken typ av nybyggnationer kan vi se idag i Göteborg? - Beskriv konkurrens situationen på marknaden. - Anser du att bostadsrätter och hyresrätter konkurrerar om kunder? - Vad tycker du om bruksystemet för hyressättning? - Beskriv hur man skapar en för säljaren fördelaktig budgivning - Beskriv hur man bör presenterar en lägenhet för att uppnå ett högt slutpris. -Varför tror du att priserna på bostadsrätter i centrala Göteborg steg mest i hela riket föregående år? - Framtidsutsikter? 46 Appendix 2 - För olika typer av lägenheter - För olika standard nivå - Krav på kök och badrum etc. - Olika områden som du tror kommer att bli populära. - Allmänt om utvecklingen på marknaden. Kundgrupper (ca 5min) Kan du efter din egen erfarenhet, dela in lägenhetsmarknaden i Göteborg i typiska kundgrupper och säg något av vad dessa efterfrågar? Är denna indelning specifik Göteborg? - Tror du att alla inredningsprogram som vissas i tv och artiklar i tidningar ändrar kundernas preferenser ? - Hur? - Till att idag ställa högre krav på lägenhets inredningen? Beskriv hur du ser på home styling och home staging (Max10 min) - Fungerar det? - Vid vilka tillfällen fungerar det bäst? - Vilka renoveringsåtgärder och standard höjande åtgärder bedömer du vara lönsamma innan försäljning? - Erbjuder ni någon kontakt med homestyling staging eller inredningsfirma? -Inga britt Werner har i en studie i Stockholm kommit fram till att skillnader i lägenheters specifika kvalitéer (hit hör inte planlösning hyra, förening etc.) kan tillskrivas 10-12% av lägenhetspriset. Vad är din kommentar till det? (Är det en rimlig siffra även i Göteborg?). - Hon säger vidare att det finns ett allmänt tycke att lägenheter byggd på 80-talet och 90-talets inte håller måttet. De är visserligen ljusa och har öppen planlösning men har dålig golv, biliga inrednings material etc. Håller du med om det? - Kan en lägenhet ha en personlighet i sig? Beskriv? - Om en lägenhet tillskrivas en image anser du då att den attraherar kunder som antingen har eller vill ha den imagen? - En Halo effekt är när någonting positivt automatiskt leder till fler positiva saker. Anser du att sådana Halo effekter kan finnas vid en vissning? Ge ett exempel! - Tror du att om lägenheten ser tilltalande ut så tror köparna automatisk att den har färre brister eller är bättre även i andra avseenden? -Tror du köparen föredrar sådant som känns igen framför sådant som inte känns igen på vissningen? Övrigt - Finns det något övrigt du vill ta upp?