'We'll Always Have Paris': Out-of-Country Buyers in the Housing Market
53 Pages Posted: 6 Oct 2018 Last revised: 17 Dec 2019
Date Written: December 17, 2019
Previous research has shown that non-local household investors make sub-optimal asset selection and market timing decisions. In real estate markets, heterogeneity in investment performance can exist even when controlling for these factors, given that prices are the outcome of a complex search-and-bargaining process. Employing unique micro-level transaction 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 local investors, ceteris paribus. Furthermore, our evidence suggests that this result is not due to search costs and information asymmetries, but instead stems from wealth-related variation 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.
Keywords: foreign home buyers; secondary residences; information asymmetries; bargaining
JEL Classification: R21; R23; R31; D12; G12
Suggested Citation: Suggested Citation