The impact of foreign investment on housing prices

Abstract

This paper constructs a partial equilibrium of housing flow market to investigate the impact of foreign investment upon housing prices. The theoretical model demonstrates that the inflow of foreign investment will result in the appreciation of house prices. The empirical results illustrate that the foreign investment has a trivial impact on the house prices. In addition, the paper finds that the household income rather that developing cost is the most important fact influencing the urban housing prices. The other findings are as follows: the interest rate policy is nearly invalid; the housing prices in bigger cites is more prone to increase; the substituting effect between rental market and ownership market is weak.