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Foreign buyers and housing price dynamics

Author

Listed:
  • Tai, Meng-Yi
  • Hu, Shih-Wen
  • Chao, Chi-Chur
  • Wang, Vey

Abstract

This paper analyzes the short- and long-run effects of foreign buyers on housing prices in an open economy with the flexible exchange-rate system. In the long run, the changes in housing prices depend on the price elasticity of foreign buyers’ housing demand, while the adjustments in the exchange rate depend on the degree of international capital mobility. Nonetheless, in the short run, the changes in housing prices and exchange rates can be over- or under-shot or mis-adjusted, dependent partly on the length of time between the policy announcement and its implementation. The housing prices could fall in the short run if foreign housing demand is price-elastic, while the exchange rates could be over-shot if capital is less mobile.

Suggested Citation

  • Tai, Meng-Yi & Hu, Shih-Wen & Chao, Chi-Chur & Wang, Vey, 2017. "Foreign buyers and housing price dynamics," International Review of Economics & Finance, Elsevier, vol. 52(C), pages 368-379.
    • Handle: RePEc:eee:reveco:v:52:y:2017:i:c:p:368-379
    DOI: 10.1016/j.iref.2017.03.013
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    Citations

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    Cited by:

    1. Yin Germaschewski & Shu‐Ling Wang, 2021. "Distributional effects of nonresident investors on the housing market and welfare," Review of International Economics, Wiley Blackwell, vol. 29(5), pages 1300-1326, November.
    2. Czerniak, Adam & Borowski, Jakub & Boratyński, Jakub & Rosati, Dariusz, 2020. "Asset price bubbles in a monetary union: Mind the convergence gap," International Review of Economics & Finance, Elsevier, vol. 67(C), pages 288-302.

    More about this item

    Keywords

    E10; F31; Housing prices; Foreign demand;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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