“We’ll Always Have Paris”: Out-of-Country Buyers in the Housing Market

Dragana Cvijanović () and Christophe Spaenjers ()
Additional contact information
Dragana Cvijanović: Warwick Business School, University of Warwick, Coventry CV4 7AL, United Kingdom
Christophe Spaenjers: HEC Paris, 78351 Jouy-en-Josas, France

Management Science, 2021, vol. 67, issue 7, 4120-4138

Abstract: Previous research has shown that nonlocal household investors make suboptimal asset selection and market timing decisions. However, in real estate markets, heterogeneity in returns can exist even with identical ex ante investment (timing) choices, given that transaction prices are the outcome of a complex search-and-bargaining process. Analyzing notarial data for the Paris housing market, we find that “out-of-country” buyers indeed buy at higher prices and resell at substantially lower prices than do local investors, ceteris paribus. Furthermore, our evidence suggests that this pattern is not due to higher search costs and information asymmetries but instead stems from wealth-related differences in bargaining intensity. Finally, we estimate the causal effect of out-of-country demand shocks on property prices in Paris to be positive but small.

Keywords: foreign home buyers; secondary residences; bargaining; information asymmetries (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2020.3686 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:7:p:4120-4138

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().