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Anchoring in the Housing Market: Evidence from Sydney

Author

Listed:
  • Peyman Khezr

    (School of Economics, University of Queensland, Brisbane, Australia)

  • Shabbir Ahmad

    (UQ Business School, University of Queensland, Brisbane, Australia)

Abstract

This paper investigates the behavior of ‘buyers’ in the Sydney housing market when they purchase homes. The literature suggests that when individuals evaluate their utilities in an uncertain situation, they may use a reference point as an anchor. We suggest that asking prices in the housing market could act as reference points or anchors and affect the utility buyers receive from buying properties. We note that the other role of the asking price is to signal unobserved characteristics of properties to buyers. In this study, we separate these two effects and empirically investigate the implications on the final price of properties with data on the Sydney housing market. We found strong evidence of anchoring behavior by buyers in this market.

Suggested Citation

  • Peyman Khezr & Shabbir Ahmad, 2018. "Anchoring in the Housing Market: Evidence from Sydney," Discussion Papers Series 596, School of Economics, University of Queensland, Australia.
    • Handle: RePEc:qld:uq2004:596
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    File URL: https://economics.uq.edu.au/files/46340/596.pdf
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    References listed on IDEAS

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    Cited by:

    1. Ka-Shing Cheung & Chung-Yim Yiu & Yihan Guan, 2022. "Homebuyer Purchase Decisions: Are They Anchoring to Appraisal Values or Market Prices?," JRFM, MDPI, vol. 15(4), pages 1-13, March.

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    More about this item

    Keywords

    Reference dependence; anchoring; asking price; housing market.;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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