The dynamics of lucky number : housing prices clustering in the Chinese megacities

Abstract

This thesis investigates the influence of cultural beliefs and superstitions, particularly the significance of the number eight, on the behaviors of homebuyers in Chinese megacities' real estate markets. In Chinese culture, the number eight is esteemed as lucky, profoundly impacting homebuying decisions by affecting both pricing strategies and market dynamics. Utilizing a robust dataset of over 115,000 second-hand home transactions in Shanghai from January 2018 to October 2023, this study employs quantitative econometric techniques—Ordinary Least Squares (OLS) regression, Geographically Weighted Regression (GWR), and Multiscale Geographically Weighted Regression (MGWR)—to dissect the role of numerological superstitions in real estate pricing and Days on the Market (DOM).

Quantitative findings from the MGWR model reveal that properties with prices ending in eight not only achieve a premium but also experience reduced DOM, especially prominent in central urban locations during periods of economic prosperity. The premiums and quicker sales are further accentuated during economic downturns, underscoring the persistent appeal of superstitious pricing under varying economic conditions. Spatial-temporal analysis across different districts and socioeconomic strata demonstrates variable impacts: more affluent areas display a stronger preference for properties with prices ending in eight during economic booms, whereas less affluent areas exhibit greater reliance on these superstitions during economic recessions.

Additionally, qualitative results from surveys highlight that homebuyers' perceptions of lucky numbers significantly sway their purchasing decisions, with many expressing a willingness to pay extra for properties that align with their superstitious beliefs. This interplay of qualitative perceptions and quantitative market outcomes challenges conventional economic models, which often overlook the influence of non-rational behaviors.

Integrating behavioral economics with cultural superstitions, this thesis enriches the theoretical frameworks of Prospect Theory and the Behavioral Asset Pricing Model (BAPM), offering novel insights into how ingrained cultural beliefs like numerology influence market dynamics. These findings have significant implications for real estate professionals, investors, and policymakers, providing them with strategies to capitalize on cultural influences for market advantage and to mitigate potential market inefficiencies introduced by these beliefs.

The study concludes with policy recommendations aimed at enhancing market efficiency and reinforcing consumer confidence by more deeply integrating an understanding of cultural drivers into real estate pricing and marketing strategies. It also identifies limitations of the current research and suggests directions for future studies to further explore the complex relationship between cultural superstitions and economic behaviors in real estate markets, thus advancing both academic knowledge and practical applications in this field.