538. Dynamic and static asking prices in the Sydney housing market

Peyman Khezr, Flavio Menezes, School of Economics Discussion Paper No. 538 April 2015, School of Economics, The University of Queensland.

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Abstract

This paper investigates the impact of two commonly used asking price strategies on house sales prices. In particular, we compare a dynamic asking price, where the seller adjusts her asking price over time as she fails to sell her property, with a static asking price, where the seller sets an asking price and sticks to it until the property is sold. While this comparison is ambiguous from a theoretical perspective, our empirical study using a comprehensive data set on the properties sold in the greater Sydney region indicates that properties with a dynamic asking price sold, on average, for $25,400 less than properties with a static asking price, which is approximately four percent of the mean property price in our sample. In addition, we also show that, controlling for the asking price strategy, the duration of sale has a significant impact on sales prices.