Buyer Search and the Role of Broker in an Emerging Housing Market:A Case Study of Guangzhou

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This paper examines homebuyer’s search process and the role of real estate broker in China’s ur- ban housing market, where inactive housing resale transactions and an immature brokerage industry are distinct characteristics. Guangzhou is used as a case study to model the intensity and duration of the search process. This study finds that buyers make trade-off between two search costs, activity cost and duration cost. The study also demonstrates that despite the industry’s immature nature, buyers using brokers do in- crease search intensity and shorten search duration by reducing the activity cost. Empirical results show that there is no specific buyer group who can effectively lower their search cost by their own efforts, due to the poor information transparency in the current housing market. The broker-choice model shows that be- sides search cost, buyers’ confidence in broker’s service quality can also greatly influence their choice, so improvement in service quality and reputation has important implications for China’s brokerage industry. This paper examines homebuyer’s search process and the role of real estate broker in China’s ur-ban housing market, where inactive housing resale transactions and an immature brokerage industry are distinct characteristics. Guangzhou is used as a case study to model the intensity and duration of the search study. This study finds that buyers make trade-off between two search costs, activity cost and duration cost. The study also demonstrates that despite the industry’s immature nature, buyers using brokers do-crease search intensity and shorten search duration by reducing the activity cost. Empirical results show that there is no specific buyer group who can effectively lower their search costs by their own efforts, due to the poor information transparency in the current housing market. The broker-choice model shows that be-sides search cost, buyers’ confidence in broker’s service quality can also greatly influence their choice, so improvement in service quality and re putation has important implications for China’s brokerage industry.
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