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Price Signals and Bid-Ask Spreads in an Illiquid Market: The Case of Residential Property in Ireland, 2006-2011

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  • Ronan Lyons

Abstract

How legitimate is it to use asking price information in the absence of transactions prices? And how does the gap between the two vary over the market cycle? This paper examines these two issues by comparing two large datasets from Ireland's property market over the volatile period 2001-2012. It finds that the two series are extremely closely correlated, both across space and across time, suggesting that in illiquid markets, or in the absence of transaction price datasets, asking prices offer a very good proxy. Nonetheless, a bid-ask spread exists at any given point in time. By exploiting information on the various stages of a housing transaction, it is possible to estimate the bid-ask spread in the housing market. That spread ranges from +4% at the height of the market in 2007 to -7% in 2010.

Suggested Citation

  • Ronan Lyons, 2013. "Price Signals and Bid-Ask Spreads in an Illiquid Market: The Case of Residential Property in Ireland, 2006-2011," ERES eres2013_244, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2013_244
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    Cited by:

    1. Ronan C. Lyons, 2015. "East, west, boom and bust: the spread of house prices and rents in Ireland, 2007-2012," Journal of Property Research, Taylor & Francis Journals, vol. 32(1), pages 77-101, March.
    2. Efthymiou, D. & Antoniou, C., 2015. "Investigating the impact of recession on transportation cost capitalization: a spatial analysis," Journal of Transport Geography, Elsevier, vol. 42(C), pages 1-9.
    3. Konstantin A. Kholodilin & Andreas Mense & Claus Michelsen, 2016. "Market Break or Simply Fake? Empirics on the Causal Effects of Rent Controls in Germany," Discussion Papers of DIW Berlin 1584, DIW Berlin, German Institute for Economic Research.
    4. Agnew, Kerri & Lyons, Ronan C., 2018. "The impact of employment on housing prices: Detailed evidence from FDI in Ireland," Regional Science and Urban Economics, Elsevier, vol. 70(C), pages 174-189.
    5. Mense, Andreas & Michelsen, Claus & Cholodilin, Konstantin A., 2017. "Empirics on the causal effects of rent control in Germany," FAU Discussion Papers in Economics 24/2017, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    6. Ronan Lyons, 2012. "Inside a bubble and crash: Evidence from the valuation of amenities," ERES eres2012_065, European Real Estate Society (ERES).

    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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