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Home Away from Home? Foreign Demand and London House Prices

Cristian Badarinza

National University of Singapore (NUS)

Tarun Ramadorai

Imperial College London; Centre for Economic Policy Research (CEPR)

November 29, 2016

The infrequent nature of crises means that pure time-series methods struggle to distinguish the effects of capital flight on asset prices from a wide range of alternative drivers. We present a new cross-sectional approach, which is motivated by the insight that investors may have different "preferred habitats" within a broad asset class. We apply the method to the question of whether foreign capital is responsible for residential real estate price movements in global cities such as London and New York, especially during crises. Applying our method on large databases of housing transactions over the past two decades, we find that foreign risk strongly affects London house prices. The effects are long-lasting, and are associated with both safe-haven effects and immigration.

Number of Pages in PDF File: 75

Keywords: house prices, foreign demand, safe-haven, London, political risk, price-pressure

JEL Classification: C53, D80, E47, F21, G12, G15

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Date posted: November 12, 2013 ; Last revised: November 29, 2016

Suggested Citation

Badarinza, Cristian and Ramadorai, Tarun, Home Away from Home? Foreign Demand and London House Prices (November 29, 2016). Available at SSRN: https://ssrn.com/abstract=2353124 or http://dx.doi.org/10.2139/ssrn.2353124

Contact Information

Cristian Badarinza
National University of Singapore (NUS) ( email )
Bukit Timah Road 469 G
Singapore, 117591
Tarun Ramadorai (Contact Author)
Imperial College London ( email )
South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom
HOME PAGE: http://www.tarunramadorai.com
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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References:  38