Research Methodology

Chapter 3 Research Methodology
3.1 Introduction
The research method it involves three elements which are the data collection, analysis and interpretation to help the researcher doing the research propose for their studies. In this study it applied the quantitative research method to find the housing index of Shanghai during 2000 to 2009, also the mortgage to income index during this period. By doing the research, for better and accurate measurement and analysis of these data to generate the better results, it has been applied the standardization (norming) method to the sampling data. The process of standardization, also called norming, removes the effect of relevant but different characteristics in order to make the important differences visible. (Neuman.W, 2011) And it also uses the secondary data analysis. The data collection will belong to secondary data collection. The sources of data are mainly in DataStream, National Bruno Database, ShangHai Bruno Database, Journal Article and Local Real-estate Agency Report, and the results will represent and analysis in finding part.
3.2 Research strategy and Approaches
By doing research there has two strategies one is quantitative research and the other is qualitative research. For quantitative research means using the numbers and statistic method. It attracts from particular instances to seek general description or test causal hypotheses; it seeks measurements and analyses that are easily replicable by other researchers. (King, Keohane, Verba, 1994.pp.3-4) And for qualitative research is multimethod in focus, involving an interpretive naturalistic approach to its subject matter. This means qualitative researchers study things in their natural setting, attempting to make sense of, or interpret phenomena in terms of meaning people bring to them. It is involves use variety of empirical materials, case study, personal experience, interview, observation, interactional, visual text etc, that describe routine and problematic moments and meanings in people’s life. (Denzin, Lincoln, 1994, p2)
Basic on above definition of quantitative and qualitative research methodology, according to this study is accessing housing affordability ratio to evaluate how people affordability during the decade, the research basic on analysis the statistic data and theoretical formulations, and tends to be on numerical measurements of specific aspects of phenomena, therefore the quantitative research has applied strategy in this study. After the strategy chosen, it needs to find the approaches to generate the results and analysis. Basic on the research purpose and objective, the foundation of this research is basic on the theory of housing affordability, which is called the price to income ratio indicator. This ratio is to interpreted the relationship between the housing price and people’s income, and it is by far the most welcome measure of housing affordability in policy research and mass media.(Hulchanski,1995) The price to income indicator is the ratio of median/mean market price of a standardized housing unite to median/mean(before –tax or disposable)household/family income. This ratio measures the relative shares of income spending on housing and aims to capture the cost burden of housing on household income. Also it can be considering as an index measurements.
3.2.1 The reason to choose the housing affordability index
As the developing and transforming of China Real Estate, nowadays it already becomes the significant components in domestic economic reform. Also the massive benefit from the real estate section makes it becomes the pillar industry in the domestic area and local cities. However during the time of the transforming of real estate, the properties prices has quickly changed to the market-oriented price, but the local householders income has not changed so much, therefore to obtained the information of the market situation and people’s consumption ability become more important for government to regulate the real estate market and make the responsible policies to protect people in different level’s, also it is important for commercial banks to landing money to the real estate developer and also to make a good portfolio to different housing mortgage loaners.
When the housing affordability hasn’t appearance, if a country or cities plan to measure the level of people’s residential consumption, need to do a lot of research works. The research may including the level of economy development, the level of people’s income, housing price, the weight of commodity expenses in people’s income, the government housing supporting policies, and the mortgage term which required by the banking, etc. it not only because the large mount of working preparation, but also with different research aspects the results may generate the different way as well, it is hard to confirm the accuracy of its findings. Later, through the repeated experiment and practice and theory development, the housing affordability has been brought out. According to experts in this area, they have defined a housing cost burden of around 30 percent of income as affordable. And the proper range for housing burden to income ratio is 4 to 6. Currently, many countries are using the housing affordability ratio, the way to choose this index not only it is simple to understand, but the level of housing burden to income which is less than 30%. This is reasonable standard has been internationally recognized.
In the middle of 19th century, lots of scholars has studied on the price to income ratio, the roots of this ratio can be back to the earlier of 19th century, at that time it used as studies of household budgets and in the commonly used turn-of-the-century expression 'one week's pay for one month's rent'. After following decades, people made a lots improvements to this ratio, and During the 1980s the often undefined term 'housing affordability' has come into widespread popular usage in North America and Western Europe with a growing body of literature, (Hallett, 1993; Linneman & Megbolugbe, 1992; Whitehead, 1991) And in 1995 Hulchanski at his paper identified six distinct ways in which the housing expenditure-to-income ratio is being used as an assumed measure of affordability.
However the housing affordability ideal for the first time introduced to China in early of 1990’s by The World Bank's Chief Economist Bertrand Renaud, he has brought a new concept of a price to income ratio to the nation. In fact, the price earnings ratio is
an indicator that reflects the ability of residential housing affordability to housing market conditions. It is also a comprehensive index to measure a country or a city the urban housing consumption level.
According to the Bertrand Renaud, there have two foundations to decide the range of housing to income ratio which is safety in 4 to 6. First is the basis on the saving payment model, which is display below,
m−1
P/I=a×∑(1+i)n
n=0
‘P’ indicates the housing price;
‘I’ indicate the household annual income,
‘a’ indicate the proportion of particular saving for purchasing the house to the householder annual income
‘m’ indicate the duration of saving
‘n’ indicate the interest rate
Through the simple saving payment model it can interpret that the rational housing affordability is related to the percentage of housing purchasing saving of annual income, the saving duration and the interest rate. For this basis may lead to the further study on the mortgage payment, which will discuss later.
The second foundation is that by cooperation with different countries in the worldwide.
The real estate just transformed in the late of the 19th century which is year of 1998, during the 20years it has dramatic changes, the booming of the real estate become unreasonable. Not like the developing countries, the real estate market is market orientated, with the long time improving and experience with government regulation, the market is more maturated.
3.1.4 Research question and research proposition。