Information Asymmetry with Heterogeneous Buyers and Sellers in the Housing Market

L. Li () and K. W. Chau ()
Additional contact information
L. Li: University of Cambridge
K. W. Chau: University of Hong Kong

The Journal of Real Estate Finance and Economics, 2024, vol. 68, issue 1, No 6, 138-159

Abstract: Abstract This study examines how heterogeneous traders on both sides of transactions behave in the housing market under information asymmetry. Two types of buyers, namely, informed and uninformed buyers, correspond to local and non-local buyers in the empirical tests. Non-local housing buyers in Hong Kong pay a 2.8% premium over local buyers in the second-hand market for housing units with similar observable attributes. We distinguish real estate developers from sellers in the second-hand market. The former has an incentive and ability to reduce information asymmetry by providing a quality guarantee on the building structure and signaling with brand name, none of which can be fulfilled by sellers in the second-hand market. Empirical results show that developers’ efforts to reduce information asymmetry allow them to fetch a higher price than sellers in the second-hand market, holding property characteristics constant. Such efforts are particularly valued by uninformed buyers as non-local buyers prefer to purchase in the first-hand market rather than in the second-hand market, especially when the problem of information asymmetry is serious.

Keywords: Information asymmetry; Housing price; Non-local buyer; Developer (search for similar items in EconPapers)
JEL-codes: D83 R2 R3 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s11146-023-09939-y Abstract (text/html)
Access to full text is restricted to subscribers.

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:kap:jrefec:v:68:y:2024:i:1:d:10.1007_s11146-023-09939-y

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/11146/PS2

DOI: 10.1007/s11146-023-09939-y

Access Statistics for this article

The Journal of Real Estate Finance and Economics is currently edited by Steven R. Grenadier, James B. Kau and C.F. Sirmans

More articles in The Journal of Real Estate Finance and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().