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First-home buyers and herding behavior in Surabaya, Indonesia

Sofian Arif Susanto (Petra Christian University, Surabaya, Indonesia)
Anastasia Njo (Department of Management, Faculty of Economics and Business Management, Universitas Airlangga, Surabaya, Indonesia and Department of Finance Management, Universitas Kristen Petra, Surabaya, Indonesia)

International Journal of Housing Markets and Analysis

ISSN: 1753-8270

Article publication date: 27 November 2019

Issue publication date: 27 November 2019

356

Abstract

Purpose

This study aims to determine the causality of herding which was traced down to social and normative influences from first-home buyers represented by undergraduate students.

Design/methodology/approach

The Perception Alignment Hypothesis was used in this experimental research, and was conducted on a sample of 125 undergraduates studying finance representing first-home buyers. The experiment provides the subjects property brochures in Surabaya to appraise a value that they see fit for purchase. The subjects were given both social- and normative-induced treatments separately using information cascade, and their valuation shifts were recorded. Their valuations were then divided into three sections under the treatment groups, consisting of initial, “social’ and “normative’ valuations.

Findings

In contrast to previous findings, the results showed that first-home buyers succumbed to both social and normative influences, causing them to herd. Further analysis of the credibility of information was conducted and it showed that the undergraduates were only prone to social influence, whereas other aspects regarding normative influences must be further researched.

Practical implications

The decline of homeownership on a global scale is concerning, especially when 60% of the market represents young adults under the age of 35. This implies that both the government and property developers may need to enact strict measures to regulate property purchases.

Originality/value

This is the first experimental study on herding of Surabaya, Indonesia, mainly focusing on human behavior and information cascade. Thus, this study could be a viable reflection to future policies in Indonesia being made to answer actual demands in the residential market.

Keywords

Citation

Susanto, S.A. and Njo, A. (2019), "First-home buyers and herding behavior in Surabaya, Indonesia", International Journal of Housing Markets and Analysis, Vol. 13 No. 3, pp. 393-411. https://doi.org/10.1108/IJHMA-04-2019-0041

Publisher

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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