Can we trust our brokers in property transactions? : a spatial perspective from broker density

Abstract

Research has found that the price of a property is influenced by a combination of attributes. Previous studies have examined the influence of multiple attributes on property prices, but have never noted the effect of the density of brokers in the property neighbourhood on transaction prices. This paper argues that the density of brokers around a property affects the degree of information disclosure, competition among brokers, and thus the transaction price, and this phenomenon is more significant in the second-hand property market, where the use of brokers is widespread and the access to information is relatively narrow. Based on information asymmetry theory, search and matching theory, and market competition theory, this paper hypothesises that the density of brokers around the property has a significant impact on transaction prices, which vary under different market conditions. To test the hypothesis, a combination of hedonic price models with fixed effects and repeat sales models is used to explain the impact of the relevant indicators on transaction prices, and the samples are grouped according to different market states. It is found that the density of brokers has a significant negative effect on transaction prices when only the number of brokers is taken into account without considering the influence of the brand, while the opposite is true when the influence of the broker brand is taken into account: the higher the influence of brokers in the region (the more brokers there are, and the more well-known the broker brands), the higher the price of the property is. Whilst the degree of the influence of the broker density-related variables does vary across market states, it does not fundamentally change the overall trend, in other words, the change in market state does not alter the above findings. The results of the study provide some reference for buyers and sellers who need to use broker services on choosing the services.