Abstract:
A capital influx into local housing markets would be expected to increase house prices, but the spillover effect onto rental prices is theoretically ambiguous. I estimate both price impacts in U.S. residential housing markets using data from a boom in real estate purchases by buyers from China, which amounted to $200 billion of purchases made between 2010 and 2019. Using a novel method to measure these purchases and an instrumental variable for where purchases are made, I find a large positive house price impact. Consistent with investment q-theory, rents fall as constructions rise, especially in areas with elastic housing supply.
Subjects:
Chinese investors
investment q-theory
house prices and rents
Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand
Housing Supply and Markets
International Investment
Long-term Capital Movements