SCARCITY EFFECTS ON REAL ESTATE VALUE: AN EXPERIMENTAL STUDY

Abstract

The "commodity theory" offers a psychological perspective to the interaction between the effects of scarcity and the enhancement of a commodity's value. It predicts that scarcity of a commodity can enhance the value and the desirability of the commodity. Using condominiums as the commodity, this study examines the effectiveness of operationalizing scarcity in the marketing of condominiums through the pricing and promotional tools in the marketing mix concept. Firstly, in terms of pricing, scarce properties conveying an indication of assumed expensiveness were tested for desirability enhancement effects. Next, with regards to promotional tools, advertisement punch lines like 80% of phase 1 sold and the brand name of developers which has the effect of operationalizing scarcity were then tested for desirability enhancement effects in the experiment. The findings from the experiment rejects the hypothesis that assumed expensiveness mediates scarcity's enhancement of condominiums but do not reject this hypothesis when it was tested on art prints. Both brand names of developers and advertisement punch lines were found to enhance desirability but reputation of developers were found to have a significantly stronger effect. Thus, in view of a gradual recovery of the property market signifying an increase in the number of new launches, developers are encouraged to utilize such marketing tools which aim to "commodify" the project i.e. create perceived unavailability in the marketing of residential properties to achieve desired sales.