Matching in Housing Markets: The Role of Ethnic Social Networks

Abstract

This paper investigates the role of ethnic matching between buyers and sellers in housing markets. Using unique public housing datasets in Singapore, we find that sellers sell homes in blocks with a high concentration of their own (other) ethnic group at significant premiums (discounts). Chinese sellers get more than 1.7% premiums when selling homes to Chinese buyers in housing blocks with high concentrations of Chinese residents, but Malay sellers accept 1.6% discounts from Malay buyers in the same blocks. We find that the high volume of the within-ethnicity transactions with the price discounts is supported by the ethnic social networks, i.e. through ethnicity-specialized real estate agents.

Keywords: Ethnic Matching, Social Networks, Housing Transactions, Cash-Over-Valuation (COV)

JEL Classification: D80, R21, R28