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How Much Do Investors Pay for Houses?

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  • Philippe Bracke

Abstract

I combine housing sales from the England and Wales Land Registry with online rental listings from property portal Zoopla to identify buy‐to‐rent transactions—known as buy‐to‐let (BTL) in the UK. These sales are procyclical, concentrated in areas where the housing market is performing well, and more common for small dwellings. Comparing these transactions against all other housing sales in 2009–2014, I show that BTL investors pay less than other buyers for the same properties. The heterogeneity of discounts across regions and property types is consistent with a simple theoretical framework that emphasizes the drivers of investors' and homeowners' demand for houses.

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  • Philippe Bracke, 2021. "How Much Do Investors Pay for Houses?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(S1), pages 41-73, March.
    • Handle: RePEc:bla:reesec:v:49:y:2021:i:s1:p:41-73
    DOI: 10.1111/1540-6229.12280
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    1. Lingxiao Li & Abdullah Yavas & Bing Zhu, 2023. "Externalities of residential property flipping," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(1), pages 233-271, January.
    2. James Mills & Raven S. Molloy & Rebecca Zarutskie, 2015. "Large-Scale Buy-to-Rent Investors in the Single-Family Housing Market: The Emergence of a New Asset Class?," Finance and Economics Discussion Series 2015-84, Board of Governors of the Federal Reserve System (U.S.).
    3. Korevaar, Matthijs, 2023. "Reaching for yield and the housing market: Evidence from 18th-century Amsterdam," Journal of Financial Economics, Elsevier, vol. 148(3), pages 273-296.
    4. Jeffrey P. Cohen & John P. Harding, 2023. "The Bargaining and Contagion Effects of Investors in Single Family Residential Properties: The Case of Denver Colorado," The Journal of Real Estate Finance and Economics, Springer, vol. 67(1), pages 29-64, July.
    5. Mark Andrew & Fabrice Larceneux, 2019. "The role of emotion in a housing purchase: An empirical analysis of the anatomy of satisfaction from off-plan apartment purchases in France," Environment and Planning A, , vol. 51(6), pages 1370-1388, September.
    6. Geoffrey K. Turnbull & Arno J. van der Vlist, 2022. "Bargaining power and segmented markets: Evidence from rental and owner‐occupied housing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(5), pages 1307-1333, September.
    7. Erlend Eide Bø, 2019. "Buy to let. Investment buyers in a housing search model," Discussion Papers 896, Statistics Norway, Research Department.
    8. Marcus T. Allen & Jessica Rutherford & Ronald Rutherford & Abdullah Yavas, 2018. "Impact of Investors in Distressed Housing Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 56(4), pages 622-652, May.

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    More about this item

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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