Prioritisation of Key Attributes Influencing The Decision To Purchase A Residential Property in Malaysia - An Analytic Hierarchy Process (AHP) Approach

International Journal of Housing Markets and Analysis
Prioritisation of key attributes influencing the decision to purchase a residential property in Malaysia: an
analytic hierarchy process (AHP) approach
Hassanudin Mohd Thas Thaker K Chandra Sakaran
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Hassanudin Mohd Thas Thaker K Chandra Sakaran , (2016),"Prioritisation of key attributes influencing the decision to
purchase a residential property in Malaysia: an analytic hierarchy process (AHP) approach", International Journal of Housing
Markets and Analysis, Vol. 9 Iss 4 pp. -
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Prioritisation of key attributes influencing the decision to purchase a residential
property in Malaysia: an analytic hierarchy process (AHP) approach
Introduction
An Overview of the Residential Property Market in Malaysia
The residential property market in Malaysia has always been an important component of the
domestic economy. Housing development programmes are normally used to stimulate
economic activity. The Ministry of Finances, Valuation and Property Services Department
categorises the property market in Malaysia into six segments, namely, the residential,
commercial, industrial, agricultural, development land, and others sub sectors. The focus of
this research is in the residential sector. The residential sector can be broadly categorised into
houses, flats, apartments, and condominiums. In Malaysia, this market has shown a sign of
maturity, with more educated and sophisticated house buyers tending to become selective and
demanding, requiring prime location, attractive features and designs, and quality finishes.
Developers have responded by reciprocating to the taste and preferences of buyers by
becoming more creative and by providing contemporary features and designs, equipped with
attractive landscape and facilities.
Housing is extremely vital to all people. Shelter is an essential need, and home ownership has
been considered as one of the crucial elements of high living standards. Home ownership
provides security, independence, and privacy. Residents place a high degree of importance on
home ownership, which is regarded as important for the stability of family life and for wealth
creation (Rahman, 2010). Buying a house is regarded as one of the most important decisions
to a person as the decision can change their life. There are internal and external attributes
influencing the decision in purchasing a house. Some of the internal attributes comprise of
the size of the house and number of rooms, while the external attributes consist of the
location of the property and accessibility to a range of utilities, services, and facilities. As
such, the decision of buying a house is different from other business decisions due to the
innate, durable, and long-term characteristics of real estate. It is a highly differentiated
product with each specific site unique and fixed in location (Kinnard, 1968 as cited in
Phan, 2012).
The increase in demand for housing and the scarcity of land for development revolving
landed residential properties in major urban areas in Malaysia such as Penang, Kuala
Lumpur, Selangor, and Johor Bahru has resulted in the rapid development of housing,
especially high-rise residential schemes in these high-density areas. For households and
businesses, residential properties have also become an attractive form of investment. Houses
are investment assets that grow in value over time and are therefore a means of saving and
wealth accumulation. Viewed from the end of 2000, the property outlook suggests that with
land prices experiencing an upward trend, strata properties, particularly affordable schemes,
continue to receive encouraging demand in the local housing market. High-rise living in
urban centres is a logical response to soaring land prices. Ministry of Finance, Valuation and
Property Services Department (2015) press release reported that developers continue to
remain positive in the primary property market with a higher number of new launches
recorded in 2014. There were 68,351 units of new launches, up from 62,376 units recorded in
2013. The rise was partly due to the high numbers of condominiums and service apartments,
which formed nearly 44.9 percent of the new launches.
A total of 247,251 transactions recorded worth RM82.06 billion in 2014, up by 0.4 percent in
volume and 13.9 percent in value from 2013. Residential property continued to be the main
contributor to the national property market, accounting for 64.4 percent and 50.4 percent of
the volume and value respectively. Selangor, Johor, and Perak remained the three leading
states in the residential segment, each with 24.6 percent, 15.8 percent and 11.0 percent
market share (Ministry of Finance, 2015).
Census 2010 provides some insight into the changing living patterns and socioeconomic
trends in Malaysia, which in turn has an impact on the housing market. Meeting the demands
of aspiring homeowners, especially first-time buyers, is expected and used as evidence that
the country has successfully made the transition. The increase in income directly increases
the individual purchasing power and also the demand for housing (Department of Statistic
2003). There were many factors which have contributed to a sharp increase to the price of
houses. These can be categorised as demand and supply factors.
Hence, this study is prepared to explicitly prioritise the key attributes influencing the
purchase of residential property. This paper uses a summary of the variables identified in the
literatures, such as location, pricing, developer, structural and amenities, developer reputation
attributes as well as the financial variable. This research is important in identifying the key
factors influencing buyers decision in purchasing residential property, which would provide
useful source of information. The present study is expected to produce significant findings to
all the stakeholders in the real estate industry, such as potential home buyers and existing
house owners to housing developers, marketers and government policy regulators, as well as
academic institutions. For example, the developers could use this information for the
development of future residential projects. Developers would then be able to better meet
home buyers needs and achieve a competitive advantage. As for the residential property
purchasers, by understanding the motivation behind purchasing residential properties,
purchasers would be able to gauge the factors that matter most before buying a property. As
for the marketers, they could use the research outcomes of this study to focus more effort on
those housing purchase factors, which significantly influence home buyers purchase decision
making. Further, the outcomes of this research could also assist the government in developing
more appropriate housing policies.
Literature review
The literature review consists of the discussion on property boom and housing price bubbles,
demand and supply drivers, decision criteria in purchasing residential property, and the
construction of the research framework.
Property boom and housing price bubbles
Property prices, in general, have been escalating in recent years. According to Chin (2013),
the property price in Malaysia was at its all-time high, resulting in difficulties even for young
home buyers and growing families to afford to own property, even more so for the low-
income group.
Housing price, like any other goods and services in a market economy, depends on the
interactions between the demand for houses and the supply of houses. Peoples demand for
owner occupied housing is determined by the price of housing, population growth, household
formation rate and income growth (Flavin and Yamashita, 2002). House prices in Malaysia
continue to be a huge concern, especially for first time house buyers and those from the low
income bracket. The residential property price has risen by 92.9 percent from 2000 to 2013
(Ministry of Finance, 2014). There isnt any sign suggesting that the house prices will be
falling in the near future. House prices in the major cities have shown a remarkable increase
over the last decade. The housing price index in Malaysia averaged 3.9 percent from 1997 to
2014. The highest it has reached is 44.50 per cent in the first quarter of 2000 and a record low
of -39.20 per cent in the third quarter of 1998. There is a decrease in the Housing Price Index
in Malaysia from 7.90 per cent in the third quarter of 2014 to 7 per cent in the fourth quarter
of 2014, suggesting the price of houses continue to increase but at a slow rate (Trading
Economics).
In order to provide affordable home for the low and medium income group as well as young
people, the government has introduced Malaysias People Housing Act (PRIMA) 2012.
Under the My First Home Scheme, the young starters are offered a house range from
RM100,000 to RM400,000. The criteria of the first time buyer must be below 35 at the age of
application and must have a household income not more than RM6,000 per month (First
Home Scheme, 2012). Under the scheme, the total financing obligations for single or joint
borrowers must not be more than 60 percent of their combined net monthly income. In
response to this scheme, developers are switching from high-end developments to mid-range
ones in order to lure first time buyers with easier financing and reduced stamp duty for
houses below RM400,000 (Cagamas, 2013). The Government has also promised to deliver
affordable houses to the nation through various housing programmes such as the Peoples
Housing Programme through its National Housing Department (JPN), and Rumah Mesra
Rakyat, Rumah Idaman Rakyat, and Rumah Aspirasi Rakyat via Syarikat Perumahan Negara
Berhad (SPNB).
Various incentives are also provided to the first time home buyers to help ease the entry costs
of purchase. These incentives include an extension of 50.0 percent stamp duty exemption on
instruments of transfer and loan agreements until 31 December 2016, a raise in the purchase
limit from RM400,000 to RM500,000, improvement in Skim Rumah Pertamaku by raising
the ceiling price to RM500,000, and increase the age eligibility from 35 to 40 years. The
government has also raised the minimum eligibility for housing loans of civil servants from
RM80,000 to RM120,000, and the maximum eligibility from RM450,000 to RM600,000 is
expected to encourage more prospective buyers in the civil sector (Ministry of Finance,
2015).
Demand and supply drivers
Urban migrations have caused an increasing demand for residential property in the city and
the scarcity of land for development of landed residential properties in major urban areas in
Malaysia, such as Penang, Kuala Lumpur, Selangor and Johor Bahru contributed to the
escalating price of residential property in these major cities. The 2013 prices rise, with Kuala
Lumpurs house price index rising by 14.4 percent (nominal), shows that Kuala Lumpur
retains its status as a market leader. Kuala Lumpurs housing market is now red-hot, with
strong price rises. Housing prices in Malaysia have risen by 8 percent in the first quarter of
2014 compared with the same period in the immediate preceding year based on figures from
the Ministry of Finance Valuation and Property Services Department. The house prices
increase is experienced by all types of property. The average price of terraced houses
increases by 8.2 percent during the year to the first quarter of 2014. A similar situation was
experienced by high-rise residential properties, detached houses, and semi-detached houses,
in which the average price of these houses has risen by 9.1 percent, 8 percent and 6.6 percent
respectively.
According to Mira (2013), Malaysia has an edge in property ownership regulations that are
relaxed and foreign investor-friendly as compared to countries like Singapore and Indonesia,
which have many control measures to limit foreign investments. The Malaysian government
has also developed the Malaysia My Second Home (MM2H) scheme to attract foreigners
residing in Malaysia. In Malaysia, foreigners are allowed to purchase freehold properties and
pay a lower stamp duty rate as compared to neighbouring countries. As reported by Yoong
(2012), the MM2H programme has brought in 17,389 foreigners from the year 2002 to 2011,
mainly from China, Singapore, Britain and Iran. The issues regarding home ownerships have
become a major concern among political leaders, town planners and the government.
An increased in population and income have also contributed to a continuous increase in the
demand for housing. The total number of households was 6.35 million as reported in Census
2010, compared to only 4.80 million households in Census 2000. This indicates a 32 percent
increase in the number of households, or an average annual increase of 3.2 per cent during the
period of 2000 and 2010. During the same period the total employed population of Malaysia
increased from 8.1 million to 11.4 million, which is equivalent to 40.9 percent increase or an
average annual increase of 4.09 per cent. The increase in population, especially those in
working groups, will indirectly increase the demand for houses since they are the productive
group with purchasing power. Over the years, the economy has recorded positive economic
growth, except for the financial and economic crisis in 1997 and 2008, which has
successfully transformed the economic status of Malaysian to the status of an upper-middle-
income nation. Malaysia is a country with a vision of wanting to achieve a high income status
nation by the year 2020. Malaysias economy has been growing at an average rate of 5.7
percent between 2010 and 2014 (BNM, 2014). This has contributed to an increase in the
average populations monthly income. As a whole, the findings of the Household Income
Survey (HIS) 2012 revealed that the mean monthly household income for Malaysians
increased from RM4,025 in year 2009 to RM5,000 in year 2012 , increasing at about 7.2 per
cent per annum (nominal). The increase in income directly increases the individual
purchasing power and also the demand for housing.
Low interest rates explain why, despite many curbs, mortgage lending is still surging in
Malaysia. Mortgage interest rates can be as low as Base Lending Rate (BLR) minus 2.3 per
cent. The average lending rate fell to 4.56 per cent in December 2013, significantly below
historic rates. There are other incentives, which have contributed to increasing demand for
houses, such as the availability of 100 percent financing, a zero lock in period, stamp duty
exemptions, and also an extended repayment period from 30 years, or up to age 75.
In order to reduce speculative pressure caused by investors, the Malaysian government has
now been stricter in the ability to obtain financing since January 2010. Among the changes
introduced was in terms of loan eligibility. The housing loan eligibility must now be based on
net income rather than gross income. Also, the Central Bank of Malaysia has lowered the
loan-to-value (LTV) ratio to 70 percent for the third property onwards. As such, investors
now may find it harder to obtain financing and it may dampen their ability to purchase more
residential properties.
The government continues to implement cooling measures to further curb speculative
activities in the housing market by increasing the rate of property speculation tax, known as
Real Property Gains Tax (RPGT) with effect from 1 Jan 2013. There is a 30 percent RPGT
for properties sold within 3 years of ownership, followed by 20 percent in 4th year and 15
percent in the 5th year, respectively. According to Lim (2013), the upward revision on the
RPGT would affect the property market in the short run and it decreases property purchasers
to speculate in the long run. Additionally, the recent government budget has also imposed
curbs on the Developer Interest Bearing Scheme (DIBS). DIBS have become a popular and
easy financing package offered in joint-promotion activities between banks and developers in
recent years as the scheme allows a low barrier to entry for property purchases, enabling
property buyers to purchase without having to make any payment until the property is fully
constructed. Property investors would have to pay interest on the project that they invested in
due to the effect of this abolishment. Subsequently, in July 2013, Bank Negara Malaysia
introduced new policies to reinforce responsible lending practices in order to curb speculative
activities in the property market. For instance, a new policy that was introduced comprises of
a new maximum home loan period, which was reduced to 35 years from the previous period
of 45 years.
On the supply side, the key factors affecting housing prices are the availability of housing
that is vacated or offered for sale and the cost of new construction. The increase in the cost of
new homes due to an increase in input costs affects the price of existing houses as both are
close substitutes. Moreover, the rise in construction costs which is also rising drastically has
caused an increase in raw material costs. Typically, the increase in construction materials is
subjected to rise by 15 percent to 30 percent on yearly basis. According to the reports
published by Construction Industry Development Board of Malaysia (CIBD), as cited in
Macdonald (2011), it is evident that the cost of core construction materials has increased
significantly since 2006, with cement increasing by 42.8 percent, sand increasing by 48.9
percent, timber by 45.4 percent, and steel by 61 percent. A huge price hike in the cost of steel
was evident in 2008, with the price jumping by 150 percent between 2006 and 2008. These
increasing construction costs translate into higher house prices as developers seek to protect
their bottom line and remain profitable.
Decision making criteria in purchasing residential property
Zanis and Jusan (2010) have identified several ways on finding buyer attributes when
choosing a house to purchase. There are two main categories of research related to real estate
buyer preferences (Weimer, 1966 as cited in Rahadi et. al, 2013). The two categories are
dwellers and environment characteristics. Dweller demographics and dweller social economy
are associated to dweller characteristics, whilst neighbourhood environment and
neighbourhood dwelling are associated with the environmental characteristics. Additionally,
Kim et. al (2005) provide useful insights into the actual residential choice, which has been
affected by factors relating to job accessibility, specific house characteristics, and
neighbourhood characteristics
Majid, Said and Daud (2012) conducted a research on the impact of buyers demography on
property purchasing in Selangor, and reported that elements of the demography, especially
employment, marital status and gender, have significantly affected property criteria which
become main aspects that have always been considered by the buyer prior to purchasing a
housing unit.
Haddad, Judeh and Haddad (2011) investigated the factors affecting buying behaviour of an
apartment in Amman, Jordan, and has revealed that respondents would significantly adopt the
main constructs when buying residential apartments, including aesthetic, economic,
marketing, geographic, and social constructs. The study also concluded that there were
significant differences in decision making regarding buying residential apartments, according
to the sample gender and age. The research findings in a study conducted by Saw and Tan
(2014) revealed that location, financial, and structural factors do affect property investors in
making their purchases.
Tans (2011) findings indicated that households were prepared to pay a premium price for a
property in a good neighbourhood. According to Choguill (2008), neighbourhood is a space
in which residents live together for a common interest. The research results show that
gatedguarded neighbourhood with landscape compound could increase residential property

values by 18.1 percent. A neighbourhood is graded as good or bad by factors such as
cleanliness, pollution, and crime, and these are important factors taken into consideration by
buyers before deciding on the purchase of a property (Chapman and Lombard, 2006; Tan,
2011). In order to meet the increasingly affluent and different house buyers, developers
should provide intangible benefits in the neighbourhood that are just as sought after by
today's house buyers such as a sense of security in the landscape compound, a feeling of
harmony with one's surroundings, and an infrastructure which supports the lifestyle of house
buyers (Tan, 2011).
The increasing trends in crimes such as burglary and snatch thefts have made crime as a
prime importance, resulting in safety in the neighbourhood as a main concern for property
purchasers in Malaysia nowadays. This has encouraged the engagement of private security
guarding in most residential areas which in most cases are financed by the residents
themselves. According to Hunter (1985) and Lang and LeFurgy (2007), homeowners are
willing to pay more to live in a gated and guarded neighbourhood in order to attain a greater
peace of mind. Similarly, investors would have to look into the property in gated and guarded
neighbourhood in order to make sure they are getting the most for their investment. It is also
perceived that a gated and guarded housing estate reflects an individuals ranking or income
(Tan, 2010a). The decision of choosing to live in a gated and guarded community is for an
elite image and also the desire for differentiation.
Tans (2012) research findings revealed that accessibility and neighbourhood environment
play a role in the decision to own a house. Prospective homebuyers also regard ecologically
friendly homes that embrace sustainability as important consideration. The needs and
preferences of households may vary at each stage of the life cycle. For example, households
with young children may prefer a peripheral location that has better access to the natural
environment. As for single working people, they would prefer central locations with better
access to services, job opportunities, and cultural offers (Ricardo et. al, 2010).
Kueh and Chiew (2005) reported that house buyers in Kuching consider price as the most
important factor for consideration. Other factors ranked in terms of importance are location,
home amenities, financing, security, developer, and community amenities. The research
findings also indicated that preference may vary between different groups of people. It is
reported that a higher percentage of the divorced, separated or widowed respondents indicate
price and security as having greater importance compared to single and married respondents.
The male respondents give security a higher ranking compared to the female respondents.
In the classical urban economic theory, the location choice of the household is treated as a
decision, in which the main considered variables include accessibility, space, and
environmental amenities (Fujita, 1989 as cited in Hurtubia, Gallay, and Bierlaire, 2010).
Accessibility accounts for travelling costs and benefits associated with the different activities
that the household members will perform at different locations in the city. Space refers to the
size and quality of the housing unit itself. Environmental amenities include land use attributes
like the presence and intensity of different economic activities (commerce, service, industry,
education, etc.) and neighbourhood quality (Hurtubia, Gallay, and Bierlaire, 2010). In
another study done by Daly et. al (2003) confirmed that location has a major impact on the
buyers preference in purchasing residential properties in Australia, UK, and Ireland.
Distance is also an important factor that affects buyers preference in the decision making of
property buyers. Distance relates to the location of the house to workplace, schools, hospital,
shops, and central business districts. According to Karsten (2007), the distance from the
workplace has been found to affect household choice among residents preferring not to spend
too much time travelling to work.
One of the decision making criteria in purchasing a house is related to structural attributes.
Structural attributes consider all physical conditions as well as the quality of the property.
Common structural attributes consist of size of living hall and dining hall, built-up size, and
number of bedrooms and bathrooms (Arimah, 1992; Fierro et. al, 2009; Laakso and
Loikkanen, 1995; Tan, 2012b; Tiwari and Parikh, 1998; Tse and Love, 2000; Wilhelmsson,
2000 as cited in Saw and Tan, 2014). Kohler (2013) mentioned that investors generally prefer
smaller properties, especially apartments and flats because these properties have always been
more popular among tenants. These are the features that one may consider before making
home-ownership decisions, particularly in western countries (Hurtubia, Gallay and Bierlaire,
2010). Karen, Thomas and Erika (2009) conducted a research revealing that structural
characteristics play bigger roles than neighbourhood amenities. Surprisingly, neighbourhood
parks are found to lower housing values.
In another research, Phan (2012) investigated the key factors affecting the house purchase
decision of purchasers in Vietnam. The research findings show a strong positive relationship
between the factors of living space, distance, and customers housing purchase decision, but
also revealed a weak positive relationship between the factors such as feature, finance, and
environment among housing decision makers.
Edwin et. als (2008) research findings show that different distributions between private and
shared space command different values from housing buyers. In general, there was a
downward pressure on the housing prices for shared communal. The findings also show that
there was a higher willingness to pay for desirable attributes such as clubhouse, indicating
people were increasingly concerned about the quality of living space in the built environment.
Residential property units which are located closely to green or recreational park are highly
favourable and preferred by households (Luttik, 2000; Lo and Jim, 2010). Community
amenities are just one more way for potential buyers to evaluate whether their lifestyle
interconnects with that of the community.
Real estate developers will have a better reputation and brand if they can interpret what
customers need, act professionally, deliver their product on time, maintain their quality, and
support the customers with good after-sales service, which will result in a better reputation
and brand (Rahadi et. al, 2013). New houses are primarily built by property developers and
residential property buyers will need assurance on the completion of the project, which is
expected on time, and also on the quality of the property they are buying. All developers are
not equal in terms of their experiences, reputation, project completion delivery, and also the
quality of the end product.
In a research conducted by Cheng and Cheok (2008) regarding the importance of branding
for property developers in Malaysia, it is revealed that property purchasers were brand
conscious in relation to the property developers and they tend to rank developers based on the
brand personality. Their findings also show that over 90 percent of the respondents usually
purchase from well-known developers. This was because there were cases where developers
were unable to complete the project on time and even some have abandoned their project.
Abandoned housing projects are dreadful events that occur in the housing industry in
Malaysia. Even though the housing industry has developed throughout the nation since
Independence Day, a negative phenomenon that keeps recurring is abandoned housing

projects (Dahlan, 2008). Yap (2013) revealed that the five major causes of abandoned
construction projects identified from existing literature include mismanagement,
unfavourable government policies, inefficient public delivery system, unfavourable economic
conditions, and financial problems. The consequences of abandoned projects for the
developers are that they may suffer a bad reputation and financial losses (Perumal, 2009 as
cited in Yap, 2013).
Financial attribute is also an important factor when considering a house purchase. Anastasia
and Suwitro (2015) researched the rational and irrational factors underlying property buying
behaviour in Bali Island of Indonesia, which revealed that only financial factor had
significant impact on buyer decisions. Furthermore, this study also showed that there were
significant differences in factors between buyers intending to live-in compared to those
seeking to invest.
As mentioned by Reed and Mills (2006), several key areas regarding financial consideration
were identified. These include mortgage interest rates, household income, house price, and
ability to obtain financing. Adair et. al (1996) and Daly et. al (2003) grouped interest rate,
maximum mortgage, maximum monthly payment, and length of time payment into financial
factor. Interest rates, such as the base lending rate (BLR) are directly correlated with the
housing market, as the sensitivity of change in interest rates may affect the demand for
properties (Tan, 2010b).
As a home buyer, financing may be the utmost important factor among all factors. This is
because financing is often involved with money, in which investors would want to gain from
their investment. In the case of homeowners, finance accounts almost 30 percent of the
decisions for them when purchasing a house (Reed and Mills, 2006). Karsten (2007)
mentioned that affordability is a major factor in terms of making purchasing decision of a
residential property. Therefore, the financial factors would play a significant role in making
investment decisions. Buying a residential property is a huge decision. It costs a lot of money.
Most buyers will be taking out a loan, and will be paying to the bank for years. And most of
all, it will be a home to raise a family. Such responsibility needs careful action and
consideration, in which a thorough study needs to be carried out in order to find out all about
the new house for sale.
Research framework
From the above literatures, the following research framework has been developed for this
study (see Figure 1). This study mainly focuses on factors influencing the buying decision of
residential properties in Malaysia, particularly in Kuala Lumpur and Selangor. The attributes
chosen are home amenities, location, pricing, developer, financing, structural factor, and
community amenities. All these attributes are considered to play significant roles in buying
decision. This study obviously differ from other studies in that this paper also includes
potential first time buyer and second time buyer.
Data and Methodology
Research method and Data Collection
The pivotal reason for this study is to prioritise the key determinant factors that influence the
buying decision of residential property in Malaysia, particularly in Kuala Lumpur and

Selangor. The reason for choosing Kuala Lumpur and Selangor is because of the rapid
growths in residential and urbanisation development that are taking place in these two states.
In order to carry out the research objectives, this study has undergone several procedures or
phases. The first phase was to critically and explicitly evaluate the past and current literatures
in order to derive the variables influencing the buying decision of residential property. The
next step was to develop the research framework, and final step was to collect interview
results for analysis purpose. This study is purely based on a quantitative approach by testing,
using the most versatile fuzzy approach known as the Analytical Hierarchy Process (AHP).
The survey question was self-administered with the purpose of gathering concrete
information regarding the subject matter from the respondents point of view. The sampling
technique for this research is based on random sampling. The researcher had surveyed about
80 respondents for the analysis purpose through personal interviews, which required the
researcher to spend about 30 to 40 minutes in explaining the survey questions to the
respondents. The survey question has been prepared strictly based on AHP protocols. Before
answering the survey questions, the respondent are required to fill in their demographic
profiles consisting of gender, age, marital status, race, education, types of buyer, and income
level. The survey question was designed in English since English is the second language of
Malaysia after the Malay language, being so most Malaysians can fluently speak in English.
Table 1 illustrates the AHP questionnaire that was designed for this study.
Table 1 illustrates the matrix that has been filled up by the respondents in this study. The
scale used to fill up the matrix is through the pair wise method (see Table 2), with a scale that
shows 1 for equally important until 9 for extremely important. In order to understand
the questionnaire matrix, let us assume the when a respondent gives more importance to
home amenities, where it is strongly more important compared to location, then he or she will
put 5 in column 1 and row 2. In contrast, if the respondent gives an opposite answer where
more importance is given to location than home amenities, and then he or she will put 1/5 in
the same column and row.
The Analytical Hierarchy Process (AHP)
According to the Saaty (2008), the AHP method is one of the most versatile methods in
evaluating a complex decision making process. It covers various decisions making processes
such as the decision related to knowledge, experience, and individual intuition. Basically, the
AHP analysis will segregate the decision into elements based on their own characteristics.
The most popular tool under the AHP analysis that is commonly used is the aggregate
individual priorities (AIP), as it is normally used to obtain the ranking of criteria from
respondents who are concerned about their right towards certain elements. In order to
calculate the priorities for each element, the judgemental matrix below will be used where
a1, 2 shows the pair wise comparison between element 1 and 2 with regards to the upper level.
The entries of a1, 2 are controlled by the rule of a12 > 0; a12 = 1 / a 21 , a11 = 1i
C1 C2 Cn
C1 a11 a12 ........ a12
A= C2 a21 a22 ........ a22
....... ....... ...... ........

Cn an1 an2 ........ ann
Briefly, Zahedi (1986) has critically divided the steps of prioritisation decision for AIP, as
follow:
i) Breaking down the decision problem into a hierarchy of interrelated decision
elements such as criteria, alternative decision, sub-criteria alternatives.
ii) Gather the input data postulated by pair wise matrices of the elements.
iii) Determine the proportion or weight of decision by using the Eigenvalue analysis.
iv) Finally, take the collective of relative proportion or weights to derive the ranking
for the decision elements.
Meanwhile, Harbi (2001), as cited in Abduh and Omar (2012) has come out with seven steps
involved in the AHP analysis, as stated below:
i) Identify the ultimate problem and goal to be achieved.
ii) The hierarchy should be engineered from the highest ( it means the objectives) via
the transitional level (which is criteria) to the minimum level or lowest
(alternatives).
iii) Developing pair wise comparison matrices (size n n) for each of the lower levels
with one matrix for each element in the transitional level above using the relative
measurement scale shown in Table 2.
iv) In the AHP analysis, the n (n-1)/2 judgements needed to come out with set of
matrices in 3. Hence the reciprocal will be automatically transformed in each of
pair wise comparison.
v) Synthesisation of the hierarchy will be applied to weight the eigenvectors by the
proportion of the weights of the criteria and the total is taken over all eigenvector
entries corresponding to those in the next low level of the hierarchy.
vi) The level of consistency in pair wise comparison will be determined using the
Eigenvalue max to compute Consistency index (CI). CI is calculated using the
formula, namely, CI = ( max n)/(n-1) where n is refer to matrix size. In
addition, the judgement criteria of consistency can be analysed by using
consistency ratio. The appropriate consistency ratio (CR) has been showed in
Table 3. In the case of CR less than 0.1, the judgement consistency is in the
acceptable range, if not then will be considered inconsistency in the decision and
need to improve further to obtain good decision.
vii) Step 3 until 6 are performed explicitly in all level of hierarchy.
Basically, Saatys (1980) mentioned that there must be some reasonable consistency in
deriving the priorities from paired comparison, in which the number of factors being
considered should be less or equal to 9. Even though the AHP analysis permits inconsistency,
this method still gives a set of measurement in each set of judgements. The consistency
judgement can be calculated used the following formula;

=

where the CR is known as consistency index whereas RI is called random index. On the
other hand, Consistency index can be computed based on this formula;
max n
=
1
where,
max = largest Eigenvalue
n = size of comparison matrix
According to the Saatys, the acceptable consistency index should be in the range of less than
0.10. If it is greater than this rule of thumb, there is evidence of inconsistency in the result,
which may be due to respondents not understanding the questions that have been asked.
Therefore, the judgement may not be reliable and acceptable. Some improvement and action
is thus needed to improve the consistency index. The analysis of consistency index can be
performed using the software called Expert Choice, version 11.
Upon obtaining the acceptable consistency index, the next process is to derive the weights or
what is known as normalised scores for the criteria. Generally speaking, this weight will be
calculated using the geometric mean for a sequence (e.g. 1, 2, 3, 4,......N) where normally
least affected by intense values than comparatively with arimethic mean. In addition, by
using the geometric mean, it is good to gauge the inner possibilities for some direct skewed
distributions. Furthermore, for the sequence contained n elements, the geometric means
produce by n-th root of the product of scores and the normalised scores is allocated by the
ratio of geometric mean divided by the total of geometric mean for all elements of the
sequence. Assume for the elements or criteria Cp, p = 1, 2,......, N, the geometric mean
(GMc) is obtained by ( N
r
j =1 pj
)
1/ N
and as for normalised scores, (NScp) is obtained by this
N
formula: GM Cp / GMcp . Table 4 shows the differences in calculating the geometric means
P =1
and normalised scores in the context of AHP analysis. Refer to the table below, which
indicates normalised scores for the M objects with regards to the N criteria. The way of
computing the geometric mean and the normalised scores for banks is made for each element
of criteria in an identical way as the multiplication of criterion weights. See the differences
between geometric and normalised scores mean in Table 4.
In contrast to Ramanathan and Ganesh (1994), where it is argued that the arimethic mean will
be appropriate in the case of AIP analysis, Forman and Peniwati (1998) mentioned that from
a quantitative point of view, both arimethic and geometric mean are appropriate to be used.
However, in the context of this paper, the AIP structure is used because the focus is on the
individuals priorities and the most suitable method to deal with individual aggregate
priorities will be geometric mean. Another justification as to why geometric mean is applied
is because in this paper, group of respondents is not considered as a new individual.
Findings and Discussions

Demographic Profiles of Respondents
Table 5 summarises the characteristics of the respondents involved in this survey. As shown
in Table 5, 50 percent of the sample respondents were male and 50 percent were female. In
terms of age distribution, 32.5 percent of the respondents were in the age category of 20-30
years old. Most of the respondents were in the age category of 31-40 years (50 percent), and
the remaining 17.5 percent of the respondents were 41 years old and above. This percentage
seems to be consistent with prior studies. Metawa and Almossawi (1998) mentioned that
exploring the perception of people and customers within the age of 20 to 50 years group will
have more impact on the policies. Given this, it may contribute a useful picture on analysing
the key attributes that influence buying decision of residential properties in Kuala Lumpur
and Selangor. As for the marital status of the respondents, the majority (64 percent) is
married whilst 36 percent are singles. In terms of ethnicity of the respondents, 39 percent
were Indians whilst Malay, Chinese and the others were 35 percent, 24 percent and 2 percent
respectively.
On an another scope, 49 percent of the respondents had a Bachelor`s degree, 26 percent had a
Masters degree, 2 percent had a doctorate degree, while the remaining 26 percent had a
diploma, certificate, SPM, or an A Level qualification. The level of education revealed that
the respondents have basic knowledge regarding the subject matter and hence it is expected
that the information given by them is valid, justifiable, and robust.
In terms of types of buyers, the percentage for first time buyer (68 percent) is greater than the
second time buyer (32 percent), whereas from the income level perspective, those who fall in
the range of RM3000 to RM5000 share the higher proportion (45 percent), while the
remaining 30 percent had an income range from RM1500 to RM3000, and lastly, the income
level above RM5000 had a percentage of 25 percent.
Findings from the Analytical Hierarchy Process (AHP)
Basically, Table 6 shows the geometric mean for individual priorities which was derived
from pair wise comparison for the key factor influencing buying decision of residential
property in Kuala Lumpur and Selangor. Subsequently, the results will be analysed and
transformed into priorities vector where it will indicate the ranking of the priorities criterion.
Table 7 shows the priority vector for all criteria together with consistency index. Looking at
the table above, the consistency index is 0.00384 which is lesser than 0.10. Hence, it
postulates that the respondents clearly understood the question asked by in this study. Being
so, this is a reasonable result. Referring to the priority vector, the most influencing key
factors in buying decision of residential property in Kuala Lumpur and Selangor is the price
of the residency, followed by community amenities, location, financing, structural factor,
home amenities, and developer, respectively.
Similarly, Kueh and Chiew (2005) also found that the public is generally concerned about the
pricing factor when making any decision with regards to buying a residential property.
However, this may not be same for everybody due to differences in terms of different group
of people such as an individual, divorced, widowed, etc. In fact, the pricing factor has been
given a higher rank compared to other decision criteria. However, rising in the price of
property may not only cause by inflation factor. It is probable that there may be other factors
contributing to this rise. As mentioned in Tong (2013), escalation in property price is

obviously due to the demand and supply factor. In addition, delay in issuing planning
permission, and increase in development costs such as utility expenses will subsequently
increase the price of a property, as the developer needs to cover the costs of raw materials.
Broadly speaking, if a delay in approval of planning occurs, it will lead to an increase in the
costs by 20 to 30 percent, where it surpasses the development costs from RM5 per square feet
to RM30 per square feet. As a result, these costs will mark-up the price of a property and
burden the buyer, especially the first time buyers. Hence, the role of the government is really
needed and the government must play an important role in this context, especially in
providing lower and reasonable rate of financing with lower monthly assurance in order to
support the their financial problem. In addition, the government could also control the
availability of house especially to those first time buyers, and the priority should be given to
them in making their reality come true in achieving their first home. In Malaysia, there is a
project called Perbadanan PR1MA Malaysia, with the main objective of this project is to
build low costs houses and properties. However, the level of awareness is not up to certain
standard. Therefore, the government should increase or speed up the marketing strategies to
make the public more aware about this project.
The finding shows community amenities have been ranked number two in the key factors
influencing the decision of buying a residential property in Malaysia. Even though the
analysis part is not based on ranking criteria, Karen et. al (2009) and Phan (2012) found that
there is strong association between buying decision and community amenities, and concluded
that one of the major focuses given by first time or second time buyer in buying residential
property is by looking at neighbourhood factors, where there is lifestyle interconnectedness
with the community surrounding the area. This includes parks, leisure centres, bus or transit
exchanges, schools, etc. Therefore, the building of residential property must be able to
generate amenities and suitable housing types and tenure for everybody in the society. In
addition, the government also needs to consider providing joint houses, where eco-
friendliness can be promoted and can help to strengthen the relationship among neighbours as
Malaysia is known as a multicultural country.
Interestingly, location has been placed in the third rank and significantly plays an important
role in buying a residential property. Similarly, the same outcome was revealed by Kauko
(2003) in which the author found out that location has strong association with the property
value. This is because a majority of the residents prefer if places such as cinema, university,
shopping complex and workplace are located within the living area as they are not interested
to consume time for travelling purposes. On the other hand, Luttik (2000) postulates that
location near to recreational park and green are much preferable by households and the
community.
Financing is placed in the fourth rank of the AHP attribute priority. This is one of the
important elements when buying a residential property because it requires a huge capital and
a majority of buyers will look for financial assistance to cover the cost of buying property.
Financial parts include factors such as financing charges, income level, house price, and the
ability to acquire enough financing. In Malaysia, once the buyers enter into a contract, they
are required to pay 10 percent of the total value and the rest 90 percent will be considered as
required financing. A larger amount will contribute to a higher financing coverage. Indeed,
banks will normally impose a financing rate between 4 to 5 percent that will determine the
amount of monthly instalment. For instance, in the case where the buyer earns a monthly
income of, lets say, RM2000, the buyer will not be entitled to apply for a financing loan as
the level of commitment is higher. Hence, financing is the utmost important factor, especially
to the first time buyer. Therefore, as stated by Karsten (2007), affordability, especially
financing, is an important factor in persuading the decision of buying a residential property.
In addition, the implementation of Good and Service Tax (GST) could also contribute to the
higher price of property where it will afterwards increase the financing amount, as developers
will not directly bill home buyers for the GST, but instead they will mark-up the sale price as
a final price. The AHP analysis indicates that structural factor attribute is even considered by
buyers in advance before they take into account home amenities and developer criteria.
Conclusion
The residential property market has always been a key economic sector of the country
because this industry is particularly linked to various sectors or industries. Since the
Malaysian population is growing tremendously on a yearly basis, there is a need to meet
housing needs of the population. Philosophically speaking, having a roof over ones head is a
must for an individual and this has been documented as one of the most basic needs and
wants of human necessities. In order to be a fully developed country by 2020, Malaysia needs
to consistently focus and drive the positive growth especially in housing sectors followed by
other sectors.
Hence, this paper was prepared to measures the key factors influencing the buying decision
of residential property in Malaysia particularly in Kuala Lumpur and Selangor using the
versatile fuzzy approach known as analytic hierarchy process (AHP). The result reveals that
one of most important attributes in buying residential property is pricing, in which it has been
considered as a higher priority among buyers followed by community amenities, location,
financing, structural factor, home amenities, and developer.
Therefore, special concentration must be given to the increase in price of property in order to
provide equal opportunity to everybody. A special blueprint or policy should be considered in
designing as the housing sector plays an important role in enhancing economic growth,
because this sector has been noted as one of the most recognised tools in influencing other
industries. To illustrate, it involves about 140 downstream industries, restructures societal
development, and help in poverty alleviation. The outcome of this study is expected to
elucidate a deeper understanding on the factors that influence buyer decision by ranking from
the most important attributes to the lowest important attributes, especially in Kuala Lumpur
and Selangor. As mentioned in the introduction part, the findings from this study can be a
breakthrough to design a better policy in providing good shelter to Malaysians and achieving
the mission 2020.
As usual, this study has one limitation where it has incorporated only two major states,
namely, Kuala Lumpur and Selangor. Hence, it is expected the result would be different if
more states are incorporated in the study. Therefore, among the future recommendations for
this study are; (i) to incorporate other states, and, (ii) use sophisticated method such as
structural equation modelling (SEM) and analytic network process (ANP) to produce a
comprehensive and robust outcome.
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Figure and Tables
Figure 1
Figure 1: Key Influencing Factors in Buying Residential Property
Home Location Pricing Developer

Amenities
Key Attributes Influencing

in Buying Residential
Property
Financing Structural Community

Factor Amenities
Source: Authors Illustration
Table 1
Table 1: Matrix of AHP questionnaire used in this study
Influencing Home Structural Community

Factors Amenities Location Pricing Developer Financing Factor Amenities
Home
Amenities
Location
Pricing
Developer
Financing
Structural
Factor
Community
Amenities
Table 2
Table 2: AHP pair wise scale
Scales Verbal judgement of importance Description of verbal judgement

1 Both are equally important Both elements contribute equally
3 Moderately important Judgement favour one element over
another
5 Strongly important An element is strongly preferable
7 Very strongly important An element is very strongly
prevailing
9 Extremely important An element is preferred by at least
an order of magnitude
2,4,6,8 Intermediate values Normally used to compromise
between two verbal judgements
Reciprocals When an activity i compared to j is assigned one of the above numbers, then
activity j compared to i is assigned its reciprocal
Table 3
Table 3: Mean consistencies of random matrices (RI values)

Size 1 2 3 4 5 6 7 8 9 10
RI 0.00 0.00 0.52 0.89 1.11 1.25 1.35 1.40 1.45 1.49
Source: Saatys (2008)
Table 4
Table 4: Geometric and Normalised Scores for Criteria Pair wise Rating
Source: Abduh and Omar, 2012

Table 5
Table 5: Respondents Profiles

Variables N (%)
Gender
Male 40 50
Female 40 50
Age
20-30 Years 26 32.5
31-40 Years 40 50
41-50 Years 8 10
> 50 Years 6 7.5
Marital Status
Single 29 36
Married 51 64
Race
Malay 28 35
Chinese 19 24
Indian 31 39
Others 2 2
Education
SPM, Certificate, Diploma, A-level 18 23
Bachelor 39 49
Master 21 26
PhD 2 2
Types of Buyers
First Time Buyers 54 68
Second Time Buyer 26 32
Monthly Income level
RM1,500 RM3,000 24 30
RM3,000 RM5,000 36 45
Above RM5,000 20 25
Table 6
Table 6: Aggregated individuals Priorities Matrix Using Geometric Mean

Influencing Home Structural Community
Factors Amenities Location Pricing Developer Financing Factor Amenities
Home
Amenities 1.67051 2.40211 1.03675 1.23141 1.06474 1.25656
Location 1.35093 1.29720 1.06599 1.11273 1.10077
Pricing 2.15504 1.81294 1.90746 1.60088
Developer 1.46538 1.18435 1.37482
Financing 1.25160 1.06399
Structural
Factor 1.15285
Community
Amenities
n=80 observations Source: Authors Own, from Expert Choice
Table 7
Table 7: Priority Vectors for all Criteria of the Decision Hierarchy

Influencing Factors Value Ranking
Home Amenities 0.1060 6
Location 0.1430 3
Pricing 0.2330 1
Developer 0.1040 7
Financing 0.1420 4
Structural Factor 0.1260 5
Community Amenities 0.1450 2
Consistency Index 0.00384

Source: Authors Own, from Expert Choice software

Prioritisation of Key Attributes Influencing The Decision To Purchase A Residential Property in Malaysia - An Analytic Hierarchy Process (AHP) Approach

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Hurtubia, R. Gallay., O. and Bierlaire, M. (2010a). Attributes of households , locations and

Karen, T. and Erika,M.2009. Housing attribute preferences in a Northern Mexico

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Greening, Vol.9 No.2, pp.113 120.

Metawa, S. A. and Almossawi, M. (1998). Banking behaviour of Islamic bank customers:

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Figure 1: Key Influencing Factors in Buying Residential Property

Home Location Pricing Developer

Key Attributes Influencing

Financing Structural Community

Source: Authors Illustration

Table 1: Matrix of AHP questionnaire used in this study

Influencing Home Structural Community

Table 2: AHP pair wise scale

Scales Verbal judgement of importance Description of verbal judgement

Table 3: Mean consistencies of random matrices (RI values)

Source: Saatys (2008)

Source: Abduh and Omar, 2012

Table 5: Respondents Profiles

Table 6: Aggregated individuals Priorities Matrix Using Geometric Mean

Table 7: Priority Vectors for all Criteria of the Decision Hierarchy

Consistency Index 0.00384

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