Housing search and housing choice in urban China

Abstract

This paper reports an investigation of homebuyers and the influence of local social capital (LSC) on their housing decisions. We adopt a housing search model and predict the following two effects of LSC: a homebuyer with more social capital in a given location will have a higher propensity to relocate in that location and will be able to secure a housing transaction at a more favourable price in that location. Using data from the owner-occupied housing market in Tianjin, China, we find that LSC tends to inhibit homebuyers from moving far from their original neighbourhoods. LSC also helps homebuyers purchase their housing units at an average price that is 7% lower than the prices paid by those with less LSC when relocating within their original neighbourhoods and 3% lower if they relocate outside of their original neighbourhoods but within the same general location.