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Anchoring in the Housing Market: Evidence from Sydney

Peyman Khezr () and Shabbir Ahmad
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Shabbir Ahmad: UQ Business School, University of Queensland, Brisbane, Australia

No 596, Discussion Papers Series from University of Queensland, School of Economics

Abstract: This paper investigates the behavior of ‘buyers’ in the Sydney housing market when they purchase homes. The literature suggests that when individuals evaluate their utilities in an uncertain situation, they may use a reference point as an anchor. We suggest that asking prices in the housing market could act as reference points or anchors and affect the utility buyers receive from buying properties. We note that the other role of the asking price is to signal unobserved characteristics of properties to buyers. In this study, we separate these two effects and empirically investigate the implications on the final price of properties with data on the Sydney housing market. We found strong evidence of anchoring behavior by buyers in this market.

Keywords: Reference dependence; anchoring; asking price; housing market. (search for similar items in EconPapers)
JEL-codes: D80 R30 D12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-upt and nep-ure
Date: 2018-09-29
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Persistent link: https://EconPapers.repec.org/RePEc:qld:uq2004:596

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