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The Effect of Foreign Investors on Local Housing Markets: Evidence from the UK

Author

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  • Filipa Sa

    (School of Management and Business King's College
    Centre for Macroeconomics (CFM))

Abstract

I use newly-released administrative data on properties owned by overseas companies to study the effect of foreign investment on the housing market in England and Wales. To estimate the causal effect, I construct an instrument for foreign investment based on economic shocks abroad. Foreign investment is found to have a positive effect on house price growth. This effect is present at different percentiles of the distribution of house prices and is stronger in local authorities where housing supply is less elastic. Foreign investment is also found to reduce the rate of home ownership. There is no evidence of an effect on the housing stock or the share of vacant homes.

Suggested Citation

  • Filipa Sa, 2016. "The Effect of Foreign Investors on Local Housing Markets: Evidence from the UK," Discussion Papers 1639, Centre for Macroeconomics (CFM).
    • Handle: RePEc:cfm:wpaper:1639
    as

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    File URL: http://www.centreformacroeconomics.ac.uk/Discussion-Papers/2016/CFMDP2016-39-Paper.pdf
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    References listed on IDEAS

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    Cited by:

    1. Andrey Pavlov & Tsur Somerville, 2020. "Immigration, Capital Flows and Housing Prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 48(3), pages 915-949, September.
    2. 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.
    3. Badarinza, Cristian & Ramadorai, Tarun, 2018. "Home away from home? Foreign demand and London house prices," Journal of Financial Economics, Elsevier, vol. 130(3), pages 532-555.
    4. Fischer, Andreas & Zachmann, Lucca, 2020. "The effect of self-financed property buyers on local house prices," CEPR Discussion Papers 14632, C.E.P.R. Discussion Papers.
    5. Zhimin Li & Leslie Sheng Shen & Calvin Zhang, 2020. "Capital Flows, Asset Prices, and the Real Economy: A "China Shock" in the U.S. Real Estate Market," International Finance Discussion Papers 1286, Board of Governors of the Federal Reserve System (U.S.).

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    More about this item

    Keywords

    Foreign investors; House prices;

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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