The effect of anchoring transaction prices to offer prices in the housing market
The effect of anchoring transaction prices to offer prices in the housing market

Summary/Abstract: Repeated attempts in scientific research to explain housing prices formation using socio-economic factors have not yielded satisfactory results. Traditional approach to explaining market phenomena has been increasingly criticised, while theories derived from behavioural economics have been gaining popularity. In particular, there have been attempts to explain certain market phenomena with the help of factors originating in the human psyche.The aim of the study presented in the article is to show that housing price levels can be subject to the anchoring effect. This phenomenon consists in price levels in the property market being shaped not only by socio-economic factors, but also as a result of accepting certain price levels by market participants, who become accustomed to them.In this study, we examine the influence of objective socio-economic factors and an anchor variable (here: the average offer prices of apartments) on the average prices of apartments in 17 cities in Poland. We employ the Hellwig and the backward stepwise regression methods. The study covers the period from 2010 to 2022. The data were drawn from the residential property price database of the National Bank of Poland and from the Local Data Bank of Statistics Poland. The results obtained by means of both methods indicate that the only significant explanatory variable is the offer price of the property. This provides grounds for concluding that transaction prices of apartments are anchored to information derived directly from the housing market, i.e. offer prices, and that social and economic factors play a relatively minor role in shaping them.

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