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Research Seminars & Workshops @ IRES


Information Shock and Housing Market Responses

Dr Lee Kwan Ok
Department of Real Estate, NUS

Date: 14 September 2016 (Wednesday)
Time: 1.00pm - 2.30pm
Venue: GIS Lab (SDE1 05-37)



Abstract
This paper evaluates housing market responses to the exogenous information shock of potential sex crime risk. Using nationwide administrative data from South Korea, we find that housing prices fall by 7% for multifamily homes within a 150 meter radius of the nearest sex offender in one month after this offender moves in. This effect decreases significantly beyond 150 meter and disappears quickly after 1 month and the result contrasts with prior evidence that the price reduction continues for 1 year (Linden and Rockoff 2008; Pope 2008a). Our hypothesis is that the perceived risk of sex crime differs between high vs. low density environment and the level of information sharing after the initial information shock varies across areas with different density and population turnover. Results of our subsample analyses support this by demonstrating that homes located in areas with the bottom 25% of population density, migration rates, and rentership rates experience a much greater, longer-term price reduction after the offender’s move-in compared to those in areas with the top 25%. In addition, we find heterogeneity across housing tenure status in responses to the information shock of potential sex crime risk. While the move-in of a sex offender causes a substantial reduction in sales prices, there is no significant change in rents of nearby homes.


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