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Japanese Purchases, Exchange Rates, and Speculation in Residential Real Estate Markets

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Abstract

Several luxury single-family home markets in Hawaii have experienced significant price movements in 1987 and 1988, along with a tremendous influx of Japanese buyers. Most noteworthy is the Waialae-Kahala neighborhood in Honolulu, where average price increases of over 60% in the past two years have occurred. This surge in prices has stimulated a great deal of speculative interest. The purpose of this article is to examine the effect of exchange rates (yen/dollar) and Japanese buyers on selected residential market prices and turnover. Using the most exhaustive and complete data set available in Hawaii covering 1986 through early 1988, hedonic pricing models as well as descriptive statistics are used to examine the effects of strong foreign interest in local housing submarkets.

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  • Norman G. Miller & Michael A. Sklarz & Nicholas Ordway, 1988. "Japanese Purchases, Exchange Rates, and Speculation in Residential Real Estate Markets," Journal of Real Estate Research, American Real Estate Society, vol. 3(3), pages 39-49.
    • Handle: RePEc:jre:issued:v:3:n:3:1988:p:39-49
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    1. Bergsten, C. Fred & Keohane, Robert O. & Nye, Joseph S., 1975. "International economics and international politics: a framework for analysis," International Organization, Cambridge University Press, vol. 29(1), pages 3-36, January.
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    Cited by:

    1. Kenneth Wieand & Jeff Donaldson & Socorro Quintero, 1998. "Are Real Assets Priced Internationally? Evidence from the Art Market," Multinational Finance Journal, Multinational Finance Journal, vol. 2(3), pages 167-187, September.
    2. Daniel Broxterman & Tingyu Zhou, 2023. "Information Frictions in Real Estate Markets: Recent Evidence and Issues," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 203-298, February.
    3. Earl Benson & Julia Hansen & Arthur Schwartz & Greg Smersh, 1999. "Canadian / U.S. Exchange Rates and Nonresident Investors: Their Influence on Residential Property Values," Journal of Real Estate Research, American Real Estate Society, vol. 18(3), pages 433-462.
    4. John Krainer & James A. Wilcox, 2011. "Regime shifts in real estate markets: Time-varying effects of the U.S. and Japanese economies on house prices in Hawaii," Working Paper Series 2011-24, Federal Reserve Bank of San Francisco.
    5. Wright, Danika & Yanotti, María B., 2019. "Home advantage: The preference for local residential real estate investment," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    6. Yang Hu & Les Oxley, 2018. "Bubbles in US regional house prices: evidence from house price–income ratios at the State level," Applied Economics, Taylor & Francis Journals, vol. 50(29), pages 3196-3229, June.
    7. Cynthia Holmes & Jia Xie, 2018. "Distortions in Real Estate Transactions with Out-of-State Participants," The Journal of Real Estate Finance and Economics, Springer, vol. 57(4), pages 592-617, November.
    8. Graeme Newell & James R. Webb, 1996. "Assessing Risk for International Real Estate Investments," Journal of Real Estate Research, American Real Estate Society, vol. 11(2), pages 103-116.
    9. Gary John Rangel & Jason Wei Jian Ng, 2017. "Macroeconomic Drivers of Singapore Private Residential Prices: A Markov-Switching Approach," Capital Markets Review, Malaysian Finance Association, vol. 25(2), pages 15-31.
    10. Xiaorong Zhou & Karen Gibler & Velma Zahirovic-Herbert, 2015. "Asymmetric buyer information influence on price in a homogeneous housing market," Urban Studies, Urban Studies Journal Limited, vol. 52(5), pages 891-905, April.
    11. Tat-kei Lai & Travis Ng, 2022. "Does Restricting Outsiders Always Lower Price and Benefit Insiders?," The Journal of Real Estate Finance and Economics, Springer, vol. 64(1), pages 153-178, January.
    12. George Cashman & David Harrison & Michael Seiler, 2014. "Advisor Choice in Asia-Pacific Property Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 48(2), pages 271-298, February.
    13. Earl D. Benson & Julia L. Hansen & Arthur L. Schwartz, Jr. & Gregory T. Smersh, 1997. "The Influence of Canadian Investment on U.S. Residential Property Values," Journal of Real Estate Research, American Real Estate Society, vol. 13(3), pages 231-250.
    14. Yu Liu & Paul Gallimore & Jonathan Wiley, 2015. "Nonlocal Office Investors: Anchored by their Markets and Impaired by their Distance," The Journal of Real Estate Finance and Economics, Springer, vol. 50(1), pages 129-149, January.
    15. Terrence Clauretie & Paul Thistle, 2007. "The Effect of Time-on-Market and Location on Search Costs and Anchoring: The Case of Single-Family Properties," The Journal of Real Estate Finance and Economics, Springer, vol. 35(2), pages 181-196, August.
    16. Tianwei Yang & Derek Huo & Lennon H. T. Choy & K. W. Chau, 2023. "The Impact of Measurement and Pricing Cost on Rental Transaction Prices – Evidence from the Institutional Rental Housing Market in Beijing," The Journal of Real Estate Finance and Economics, Springer, vol. 66(1), pages 119-140, January.
    17. Sauveur Giannoni & Olivier Beaumais & Caroline Tafani, 2019. "Price gap between non-local and local buyers on the farmland market: a potential outcome approach," Working Papers hal-02400305, HAL.
    18. Poh Har Neo & Seow Eng Ong & Yong Tu, 2008. "Buyer Exuberance and Price Premium," Urban Studies, Urban Studies Journal Limited, vol. 45(2), pages 331-345, February.

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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