The effect of virtual reality on the marketing of residential property

Abstract

Property technology has ushered in new possibilities for the real estate industry, including the use of virtual reality (VR) technologies by real estate agents when marketing properties. Previous studies have identified factors in determining purchase intents within a virtual setting, but little is known about how such technologies affect homebuyers’ purchase decisions. In this study, a family-home purchase decision-making model is used to conceptualise how VR can affect buyers’ involvement in the property purchasing process. Using transaction data from Wuhan City, China, the study found that a 1% increase in the number of followers visiting an online property portal resulted in a 21% increase in physical home visits. The study also indicates that VR tours shorten the marketing time of property by 6.4% and narrow the bid-ask spread by 2%, ceteris paribus. These findings suggest that emerging property technologies such as VR can enhance the purchase decision-making process and reshape the role of the real estate agent.

Keywords:

• Virtual reality (VR)
• property marketing
• time on the market (TOM)
• home purchase decision-making process

Acknowledgements

We acknowledge the assistance provided by Mr Michael Allen in the data analysis with his Summer Research Scholarships being financially funded by the University of Auckland Business School (Project Ref: BUS026 Does virtual reality (VR) technology affect property purchase behaviour?).

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 According to Baum (2017, p.8), “there are three PropTech sub-sectors (verticals), and three drivers (horizontals). The verticals are real estate FinTech; shared economy; and smart real estate; whereas the horizontals are information; transactions (or ­marketplaces); and control.”

2 Alshawi & Faraj (1995) and Whyte et al. (2000) indicate that VR technologies with real-time manipulation and three-dimensional visualisation can assist in facilitating the building design and construction process and can analyse building structures through computer simulation in real-time (Mahdjoubi et al., 2013; Setareh et al., 2005). VR technologies can also enhance construction site safety (Guo et al., 2017; Park & Kim, 2013; Zhao & Lucas, 2015), specifically the safety of construction workers (Le et al., 2015) and help identify hazards before construction (Li et al., 2018). Wang & Hu (2009) explain how interactive visual simulation provides users with a sense of immersion in property displays. Yu (2011) highlights how VR can minimise the limitations of a two-dimensional graphic display. Juan et al. (2019) reveals that during the interior decoration process using a VR-based interior design system reduces cognitive discrepancy and enhances spatial perception. Ahmed (2018) found that property management professionals were able to utilize the building information modelling to automate the risk management process and improve overall project management practice.

3 Many property agencies, including Homelink in this study, have started to invest in developing 3D tours that allow use through low-cost VR headsets, e.g., Google cardboard, for potential buyers to experience immersive 3D VR home tours. The VR technology is straightforward to use. Provided that it is not the scope of this study to discuss the ease of VR in property marketing, for futher information, please see https://imaginovation.net/blog/vr-applications-real-estate-business/

Additional information

Notes on contributors

Chuyi Xiong

Chuyi Xiong is a lecturer at JiangHan University Business School. She obtained her PhD from the University of Auckland. Her research focuses primarily on property markets, especially the role of agents and how new technology can reform the residential real estate market. Since receiving her master’s in finance from Northeastern Unversity, she has pursued a multidisciplinary research agenda, and she is particularly interested in urban economics and residential mobility. She was awarded the post-graduate research scholarship at the Pacific Rim Real Estate Society Conference in 2019 during her PhD studies.

Ka Shing Cheung

Ka Shing Cheung is a Senior Lecturer in Property at the University of Auckland Business School. His research primarily focuses on property markets, including understanding the roles governments and institutions can play in shaping real estate markets. He was also a Fulbright scholar at UCLA Luskin School of Public Affairs and an Endeavour fellow at The University of Melbourne.

Deborah Susan Levy

Deborah Sushan Levy is the Head of Department of Property at the University of Auckland. She researches behavioural aspects of property, property management and real estate marketing.

Michael Allen

Michael Allen is an Bachelor of Commerce and Science (Conjoint) at the University of Auckland. He is also the recipient of the Summer Research Scholarships 2018-2019 for this research project.