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'We'll Always Have Paris': Out-of-Country Buyers in the Housing Market

Dragana Cvijanovic and Christophe Spaenjers ()

No 1311, HEC Research Papers Series from HEC Paris

Abstract: This paper studies the investment decisions and price impact of non-resident foreigners in the Paris housing market, employing unique micro-level transaction data over the period 1992–2016. We find that these “out-of-country” buyers generally purchase relatively small but high-quality properties in desirable neighborhoods and in areas with high ratios of compatriots. Ceteris paribus, they pay higher prices, hold for longer, and realize lower capital gains, highlighting the importance of information asymmetries and search costs in residential real estate. Crucially, however, out-of-country buyers’ quality-controlled purchase prices are also positively affected by home-country economic conditions, which suggests that global variation in the willingness-to-pay for real estate affects pricing in hotspots such as Paris. When instrumenting out-of-country demand, we find that it has pushed up prices of ex ante less valuable properties that have nonetheless been exposed to such demand.

Keywords: foreign home buyers; secondary residences; search costs; private valuations (search for similar items in EconPapers)
JEL-codes: D12 G12 R21 R23 R31 (search for similar items in EconPapers)
Date: 2018-10-03
Note: Available at SSRN: https://ssrn.com/abstract=3248902 or http://dx.doi.org/10.2139/ssrn.3248902
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1311

DOI: 10.2139/ssrn.3248902

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