Copyfrom：Dept. of Finance Time：2020-09-11
Theme：Straw Purchase or Safe Heaven? The Hidden Perils of Illicit Wealth in Property Markets
Speaker：SUMIT AGARWAL（National University of Singapore）
ID：648 0823 2617
Real estate markets are highly vulnerable to inflows of illicit wealth, given the clandestine nature of dark money, making these activities difficult to detect and estimate. We exploit one of the largest offshore data leaks – the Panama Papers – to study how the associated individuals behave in housing transactions and quantify the effects of their housing market participation. We find that buyers linked to offshore secrecy purchase properties at a premium of 3.8%. Additional robustness and heterogeneity tests evidence that this premium is driven by these individuals’ secret funding and agenda to park money in properties as a safe haven. We further explore two policy shocks: the 2007 introduction of a cross-border cash movement policy and the 2010 implementation of the Estate Agents Regulations (EAW). After the former, the property selling prices of these individuals decreased by 5.5%, while their property purchase prices decreased by 2.7% after EAW. In addition, we document a short-term negative externality of Panama-linked purchases on properties in the same blocks, projects and neighborhoods, revealing price increases of 1.3%, 2.0% and 3.4%, respectively.
Sumit Agarwal is the Low Tuck Kwong Professor at the School of Business and Professor in the departments of Economics, Finance and Real Estate at the National University of Singapore. Previously, he held positions as a Professor of Finance at Georgetown University, senior financial economist in the research department at the Federal Reserve Bank of Chicago and a senior vice president and credit risk management executive in the Small Business Risk Solutions Group of Bank of America.
Sumit’s research interests include issues relating to financial institutions, household finance, behavioral finance, international finance, real estate markets, urban economics and capital markets. He has published over eighty research articles in journals like the American Economic Review, Quarterly Journal of Economics, Journal of Political Economy, Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Management Science, Journal of Financial Intermediation, Journal of Money, Credit, and Banking among others. Additionally, he has co-written a book titled Kiasunomics and co-edited a collected volume on Household Credit Usage: Personal Debt and Mortgages.
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