Hungry ghosts and home prices

Many rituals, traditions, and beliefs are passed down from generation to generation over the centuries. Like Americans have Halloween, Chinese have the month long Hungry Ghost festival when the gates separating the realm of hell and the realm of the living will open.

During this period in the seventh month of the lunar calendar Chinese families make offerings to their deceased ancestors, hoping that wandering spirits that are appeased with food and offerings will not cause mischief to homes and work places.

For Taoists there are taboos to be avoided during the Hungry Ghost month such as not going out at night, keeping doors closed, and avoiding buying, renovating, and moving houses during the month. For many these beliefs are entrenched into daily life.

So what impact does this superstition have on home sales during Hungry Ghost month? The causal effects are hard to establish scientifically. Nonetheless understanding how such belief influence the decision-making of individuals in daily activities has become a growing focus of study.

iStock 000025038602SmallThere are many real-world examples of how superstitions influence people’s behaviour. For example, car owners pay higher prices for car-plates having the number eight – in Chinese it sounds similar to the word “prosper” and is believed to be auspicious.

House buyers were also found to have paid a premium for houses with unit numbers or addresses ending with the number eight. This is prevalent in places with a large Chinese population, such as Vancouver, Singapore, Hong Kong, and also China.

In housing, the issue then is whether superstition surrounding the seventh month leads to people putting off home purchases, and whether there is a corresponding fall in prices when transactions take place.

In our study we studied the buying behaviour of Chinese home-buyers and non-Chinese buyers during Hungry Ghost month, using data of 82,001 non-landed private housing transactions in Singapore from 2000 to 2009.

Contrary to predictions that buyers’ interest is dampened during the seventh lunar month, we found that the cumulative seventh-month transactions over the 10-year sample period have in fact been relatively strong.

On average, the lunar seventh month recorded sales of slightly above 850 units (see chart below).

The fifth, sixth and seventh lunar months were the most active in terms of the number of transactions, followed by quite a sharp fall in the eighth through to the 10th month.

charts
The strong sales during Hungry Ghost month may have been shored up by non-superstitious buyers (including non-superstitious Chinese buyers), who found plenty of good bargains during a period when superstitious Chinese buyers stayed away.

When we plot the distributions for housing prices in the seventh lunar month relative to other months, we observed significant price discounts for house transactions, in the range of between $4,000-$8,000 per sq metre.

We next ran an empirical model, controlling for housing attributes (such as size, floor level, tenure and housing type), time variations (market cycles) and the effects of location on prices.

Our results show that prices for homes are 7.43 per cent lower for Chinese buyers when the purchase is made during the Hungry Ghost month relative to other months.

Chinese house buyers who are above 50 years of age are more likely to avoid buying houses during the Hungry Ghost month.

In the event that these buyers purchased a property during the Hungry Ghost month, they enjoyed an even higher discount of 8.45 per cent, compared to houses bought in other months.

ThinkAloud4Chinese buyers enjoyed a discount of 10.89 per cent in the resale market relative to other months, if the purchase is made during the seventh lunar month. The discounts are lower – estimated at 8.09 per cent – in the developer sales market.

So what about the belief that buying a home during Hugry Ghost month will bring bad luck?

One way to test this is to look at court records of car accident cases.

We found that Chinese buyers who bought houses in the Hungry Ghost months did not have a higher probability of being involved in car accidents.

The high sales volume in the lunar seventh month over the 10-year period of 2000 to 2009 may indicate that non-superstitious buyers have been able to arbitrage for lower prices in non-landed private housing markets during the Hungry Ghost month.

It seems to suggest that buyers who do not find it taboo to buy houses during the Hungry Ghost month are taking the opportunity to visit developers’ show-flats and to negotiate good discounts, when other superstitious Chinese buyers shun the market.

Research for this study was conducted in collaboration with Dr Choi Hyun-Soo of Singapore Management University and Dr He Jie, who obtained her PhD in real estate and urban economics from the National University of Singapore

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