Behavioural Aspects of Price Expectations and the Anchoring Effect on the Housing Market – Polish Case Study

ABSTRACT

Housing is a heterogeneous good, which makes choosing a house a complex process. An unexplained variability of the housing prices led to growing interest in studying prices and price expectations from a behavioural perspective. We conduct an experiment to study house price anchoring. In this research we use empirical data, examining the strength of the anchoring effect in terms of the external paradigm. We check whether and how respondents revise their valuations and expectations after receiving additional external information. It turns out that anchors impact households’ decisions regarding the housing price valuation and dynamics forecasts, which could suggest households’ autoregressive way of thinking.

KEYWORDS:

• Behavioural economics
• house purchase decisions
• anchoring
• value judgment
• house price expectations

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. From an investor’s perspective, Shie (2019) investigates the relationship between the highest prices of the last few years and projected returns in the real estate market.

2. Based on descriptive statistics of housing prices from the Emmerson database. Emmerson is a company that gathers data on transaction prices from house price registers for valuations purposes.

3. This work was supported by Narodowe Centrum Nauki under Grant Miniatura 6.

4. If data samples sizes are sufficiently large, a normal sampling distribution can be assumed and parametric procedures are used. On the other hand, if the data sample is relatively small, it is necessary to use a non parametric procedures, which is a useful alternative to parametric tests.

5. In the study we use medians, not means, because the response distribution is usually skewed.

Additional information

Funding

This work was supported by the Narodowe Centrum Nauki [Grant Miniatura 6].