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Effect of Ownership Composition on Property Prices and Rents: Evidence from Chinese Investment Boom in US Housing Markets

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Abstract
A capital influx into local housing markets would be expected to increase house prices, but the spillover effect onto rental prices is theoretically ambiguous. I estimate both price impacts in U.S. residential housing markets using data from a boom in real estate purchases by buyers from China, which amounted to $200 billion of purchases made between 2010 and 2019. Using a novel method to measure these purchases and an instrumental variable for where purchases are made, I find a large positive house price impact. Consistent with investment q-theory, rents fall as constructions rise, especially in areas with elastic housing supply.

Suggested Citation

  • Jung Sakong, 2021. "Effect of Ownership Composition on Property Prices and Rents: Evidence from Chinese Investment Boom in US Housing Markets," Working Paper Series WP-2021-12, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:93017
    DOI: 10.21033/wp-2021-12
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    More about this item

    Keywords

    Chinese investors; investment q-theory; house prices and rents;
    All these keywords.

    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
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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