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Foreign buyers, price dispersion and local buyers eviction in bargaining markets

Author

Listed:
  • Sauveur Giannoni

    (Laboratoire Lieux, Identités, eSpaces et Activités (LISA))

  • Olivier Beaumais

    (Laboratoire Lieux, Identités, eSpaces et Activités (LISA))

  • Caroline Tafani

    (Laboratoire Lieux, Identités, eSpaces et Activités (LISA))

Abstract

The presence of foreign buyers in land and housing markets has become a major concern for many regions in the world, sometimes seen as leading to the eviction of local (domestic) buyers from the market. We argue that the existence of the non-local buyer premium is a driving force behind the local buyer eviction phenomenon. To account for this phenomenon, we built a stylized static search and bargaining model with one type of seller and two types of buyers, local and non-local. We show that the market is in general characterized by the coexistence of two different selling prices, a high price paid by non-local buyers and a low price paid by local ones. Yet, if the price premium exceeds a given threshold, which we call the maximum sustainable price dispersion cut-point, no seller will be willing to deal with a local buyer at a low price anymore. To illustrate our theoretical results, we use a data set of more than 4,800 observations on the seaside farmland market of Corsica between 1998-2008. Controlling for land characteristics and potential endogeneity issues, a huge non-local premium of roughly e16 per square meter is found.

Suggested Citation

  • Sauveur Giannoni & Olivier Beaumais & Caroline Tafani, 2017. "Foreign buyers, price dispersion and local buyers eviction in bargaining markets," Working Papers 005, Laboratoire Lieux, Identités, eSpaces et Activités (LISA).
    • Handle: RePEc:lia:wpaper:005
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    File URL: https://umrlisa.univ-corse.fr/RePEc/lia/pdf/WorkingPaper05.pdf
    File Function: First version, 2017
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    Citations

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    Cited by:

    1. Steven Caudill & Claudio Detotto & Dominique Prunetti, 2020. "Bargaining power in apartment sales in Corsica: A latent class approach," Urban Studies, Urban Studies Journal Limited, vol. 57(13), pages 2754-2772, October.
    2. L. Li & K. W. Chau, 2024. "Information Asymmetry with Heterogeneous Buyers and Sellers in the Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 68(1), pages 138-159, January.
    3. Alkan Gökler, Leyla, 2021. "Foreign demand and high-rise luxury housing projects in two Turkish cities: Ankara and Trabzon," Land Use Policy, Elsevier, vol. 103(C).

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