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Are new entrants to the residential property market informationally disadvantaged?

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  • Craig Watkins

Abstract

This paper sets out to test whether, as a consequence of being informationally disadvantaged, new entrants to residential property markets pay significantly higher prices for a hypothetical standardized property. The paper analyses data on house sales in Glasgow between April 1991 and March 1992. The transactions data are subdivided into mutually exclusive groups of households and the prices paid are examined. The prices paid by first time buyers are compared to the prices paid by repeat purchasers, and the prices paid by in-migrants are compared with those paid by intracity movers. Hedonic house price functions are estimated for each subgroup in order to standardize for differences in the physical, neighbourhood and locational characteristics of the dwellings purchased. The equations are then tested for parameter equality, in order to determine whether the implicit prices paid by new entrants and existing owners are different. The main conclusion is that, on the basis of the subgroups examined, there is no evidence that new entrants pay more for housing as a result of informational disadvantage. As such, it appears that new and existing actors in the market make their house purchase decisions on the basis of a common information set.

Suggested Citation

  • Craig Watkins, 1998. "Are new entrants to the residential property market informationally disadvantaged?," Journal of Property Research, Taylor & Francis Journals, vol. 15(1), pages 57-70, January.
    • Handle: RePEc:taf:jpropr:v:15:y:1998:i:1:p:57-70
    DOI: 10.1080/095999198368509
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    1. Rothenberg, Jerome & Galster, George C. & Butler, Richard V. & Pitkin, John R., 1991. "The Maze of Urban Housing Markets," University of Chicago Press Economics Books, University of Chicago Press, number 9780226729510, September.
    2. Timothy J. Bartik & V. Kerry Smith, 1996. "Urban Amenities and Public Policy," Book chapters authored by Upjohn Institute researchers, in: V. Kerry Smith (ed.),Estimating Economic Values for Nature: Methods for Non-Market Valuation, pages 271-318, W.E. Upjohn Institute for Employment Research.
    3. Freeman, A Myrick, III, 1979. " Hedonic Prices, Property Values and Measuring Environmental Benefits: A Survey of the Issues," Scandinavian Journal of Economics, Wiley Blackwell, vol. 81(2), pages 154-173.
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    Cited by:

    1. Ralph Siebert & Michael J. Seiler, 2020. "Why Do Buyers Pay Different Prices for Comparable Products? Evidence from the Housing Market," CESifo Working Paper Series 8337, CESifo.
    2. Ralph B. Siebert & Michael J. Seiler, 2022. "Why Do Buyers Pay Different Prices for Comparable Products? A Structural Approach on the Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 65(2), pages 261-292, August.
    3. Anthony Pennington-Cross, 2006. "The Value of Foreclosed Property," Journal of Real Estate Research, American Real Estate Society, vol. 28(2), pages 193-214.
    4. 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.
    5. 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.
    6. Keith Ihlanfeldt & Tom Mayock, 2012. "Information, Search, and House Prices: Revisited," The Journal of Real Estate Finance and Economics, Springer, vol. 44(1), pages 90-115, January.
    7. 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.
    8. 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.
    9. 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.
    10. Manya M. Mooya & Chris E. Cloete, 2007. "Informal Urban Property Markets and Poverty Alleviation: A Conceptual Framework," Urban Studies, Urban Studies Journal Limited, vol. 44(1), pages 147-165, January.
    11. Louis Rosenburg & Craig Watkins, 1999. "Longitudinal Monitoring of Housing Renewal in the Urban Core: Reflections on the Experience of Glasgow's Merchant City," Urban Studies, Urban Studies Journal Limited, vol. 36(11), pages 1973-1996, October.
    12. Manya M. Mooya, 2009. "Market Value without a Market: Perspectives from Transaction Cost Theory," Urban Studies, Urban Studies Journal Limited, vol. 46(3), pages 687-701, March.
    13. Nan Liu & Deborah Roberts, 2012. "Do Incomers Pay More for Rural Housing?," Environment and Planning A, , vol. 44(8), pages 1986-2005, August.
    14. 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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