Rich Buyers and Rental Spillovers: Evidence from Chinese Buyers in US Housing Markets
Dr. Jung Sakong
Federal Reserve Bank of Chicago
In a model of housing tenure and quantity choices, arrival of rich buyers increases user demand but also stimulates asset demand and hence investment. House prices rise, but spillovers onto rental prices depend on supply elasticity and other factors. I use the Chinese buying boom in US residential housing markets — $200 billion in the past decade — to study rich buyers’ impact. I identify Chinese holdings using deed records and names, and estimate their causal impact by instrumenting for Chinese buyers’ demand using flight time from China due to flight-route changes. I find a large house price impact. Consistent with Q-theory, rents fall as constructions rise, especially in areas with elastic housing supply. Opposition to rich buyers — foreign buyers, institutional owners and gentrification — may be due to majority homeowners’ higher cost of living.
(Please note that this is a joint Finance-Econ seminar.)
