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“We’ll always have Paris” : out-of-country buyers in the housing market
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Cvijanović, Dragana and Spaenjers, Christophe (2021) “We’ll always have Paris” : out-of-country buyers in the housing market. Management Science, 67 (7). pp. 4120-4138. doi:10.1287/mnsc.2020.3686 ISSN 0025-1909.
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Official URL: http://dx.doi.org/10.1287/mnsc.2020.3686
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.
Item Type: | Journal Article | ||||||||
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Subjects: | B Philosophy. Psychology. Religion > BF Psychology H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HG Finance |
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Divisions: | Faculty of Social Sciences > Warwick Business School | ||||||||
Library of Congress Subject Headings (LCSH): | House buying , House buying -- France -- Paris, Second homes, Negotiation , Housing -- Prices -- France -- Paris, Real property -- Foreign ownership, Investments, Foreign | ||||||||
Journal or Publication Title: | Management Science | ||||||||
Publisher: | Institute for Operations Research and the Management Sciences (I N F O R M S) | ||||||||
ISSN: | 0025-1909 | ||||||||
Official Date: | July 2021 | ||||||||
Dates: |
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Volume: | 67 | ||||||||
Number: | 7 | ||||||||
Page Range: | pp. 4120-4138 | ||||||||
DOI: | 10.1287/mnsc.2020.3686 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||
Date of first compliant deposit: | 12 October 2020 | ||||||||
Date of first compliant Open Access: | 27 November 2020 |
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