Effect of Heuristic Factors and Real Estate Investment in Embu County, Kenya

Abstract

Investment decisions are deemed as a deliberate and rational process based on availability of information. Though at times people are usually found to hold little information but yet end up making general decisions. Heuristics factors are simple rules of the thumb which explain how people make decisions, arrive at judgments and solve problems when faced with complex situations or in cases where the available information is incomplete. This study sought at assessing the influence of the heuristic factors on real estate investment in Embu County. The study was guided by Heuristic Theory. A census of 126 registered real estate investors from Embu town, Runyenjes and Siakago Urban centers was undertaken. Primary data was collected through a self-administered questionnaire composed of closed ended questions. Cronbach alpha coefficient of 0.7 was used to ascertain test of the reliability of the data collection instrument. Descriptive and regression analysis were used to analyze data with the help of statistical package. Inferential statistics was also carried out to establish the nature of the relationship that exists between heuristic factors and real estate investment. Data was interpreted with the help of 0.05 significance P-values. Model fitness R2, ANOVA statistics and regression coefficient were generated. Prior to running a regression model, normality test was conducted. The study findings indicated heuristics factors have a positive and statistically significant relationship with real estate investment in Embu County. This study concludes that real estate investors in Embu County sometimes do not make investment decisions rationally but are influenced by heuristic biased decisions. The study recommends that Embu County Government should establish a mechanism to ensure that the prices of real estate in specific regions are availed to enable investors evaluate price changes as it may influence their decision to buy or sell the investment.