“We’ll Always Have Paris”: Out-of-Country Buyers in the Housing Market
Dragana Cvijanović () and
Christophe Spaenjers ()
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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
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:7:p:4120-4138
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