Investigating the spillover effects of neighbouring housing rents on housing prices: evidence from Beijing, China

Purpose The purpose of this paper is to investigate the spillover effects of neighbouring rents on housing prices. Design methodology approach Treating neighbouring rents as a locational attribute, the authors estimate a price–rent hedonic model using owner-occupied and rental housing transactions from Beijing (2016–2018). In addition, the empirical model shows substantial robustness using instrumental variable-two-stage least squares estimation, Oster’s selection-on-unobservables test and placebo tests. Findings The authors find that a 1% increase in one-quarter-lagged neighbouring rents raises sale prices by about 0.35% in OLS estimation, while the spillover is around 0.23% in instrumental variable (IV) estimation. Furthermore, rental spillovers are heterogeneous – stronger for mid-sized and newer housing units, outside school-district zones and in Chaoyang, Haidian and Shijingshan, while weaker in new-town areas. In addition, exploiting a late-2017 tightening of rental supply, the authors further show that the spillover intensifies thereafter. Practical implications The findings highlight the interconnectedness of the rental and ownership markets and underscore the need for urban housing policy to consider the signals of the rental market. Social implications Policies that optimize and professionalize rental supply can mitigate housing market volatility, moderate house price inflation and enhance market efficiency in transitional housing systems. Originality value The originality lies in regarding neighbourhood housing rents as a locational attribute of housing prices and investigating the neighbouring rental spillovers of housing rents.