Research

Quantifying the Effects of Foreign Investment Shock and Low Interest Rate Shock on the Toronto Housing Market (Job Market Paper)

Abstract: This paper quantifies the influences of increased foreign real estate investment demand and low interest rates on the Toronto housing market. I use a general equilibrium model calibrated to Toronto statistical moments, and perform counterfactual exercises by feeding into the model the June 2013 - April 2017 levels of foreign investment shock and interest rate shock respectively. The results show foreign investment influx at the time raised home prices by 2.2% - 4.9%, whereas lower interest rates increased home prices by 9.0% - 20.8%. Between the two, the low interest rate effects dominated the foreign investment effects, contributing to over 80% of the composite influence. My findings suggest that foreign investment was not a major contributing factor to surging property prices in Toronto during the time in question, contrary to the mainstream beliefs. In comparison, low interest rates accounted for a substantial fraction of the observed price appreciation. Furthermore, the calibrated model suggests that historically low interest rates worsen homeownership inequality by generating cross-sectional heterogeneous effects: while high-income households take advantage of low interest rates and drive up property demand, low-income households are disproportionately priced out of homeownership.

Determinants of the Canadian Housing Prices: A Scoping Review

Abstract: This paper provides a systematic scoping review of academic and policy studies that examine the determining factors of the Canadian residential real estate price movements between 2000 and 2019. I use a text-based processing and theme classification algorithm on articles identified in Scopus and relevant policy institutes, and find that the fundamentals, policies and regulations, foreign ownership and immigration are among the top research topics in the Canadian literature.

Home Price Growth and Newspaper Sentiment in Canada

Abstract: In this paper, I construct a text-based sentiment index to approximate housing market expectations by measuring the relative tone in regional newspaper articles about the residential real estate market. I examine the relationship between the sentiment index and local home price movements and investigate whether the COVID-19 pandemic had an impact on this relationship. The results show that media sentiment had a statistically significant but short-lived predictive effects on future home price growth, while it was also influenced by cumulated price appreciations in the recent past. However, this relationship has significantly weakened between 2020 and 2022.