Impacts of social capital on housing prices: the case of special relationship-based transactions
Abstract
In Taiwan, many housing transactions are special relationship-based transactions that involve family and friends, debt relations, urgent purchases and sales, and government agencies. As such, the prices in such transactions should differ from those in what we consider to be normal arm’s length transactions. In this regard, social capital theory can be used to analyze these transactions. The empirical data on housing transactions conducted in Taipei City from January 1, 2012 to December 31, 2018 were collected for this study. The empirical results showed that the prices in transactions involving debt relations and urgent purchases and sales were 22.6% lower than those in normal arm’s length transactions. The prices in transactions with government agencies were 48.9% lower than those in normal arm’s length transactions. The prices in transactions with first-degree, second-degree, and third-degree relatives were respectively, 57.3%, 53.1%, and 50.3% lower than those in normal arm’s length transactions. The prices in transactions involving friends were 28.0% lower than those in normal arm’s length transactions. The empirical results highlight the importance of the impacts of personal relationships or social relations on housing prices in special relationship-based transactions. The results also supported the social capital hypothesis.
Keyword : special relationship-based transactions, normal arm’s length transactions, social capital, social capital hypothesis, personal relationships, housing prices
How to Cite
Lee, C.-C., Yeh, W.-C., Yu, Z., & Liang, C.-M. (2023). Impacts of social capital on housing prices: the case of special relationship-based transactions. International Journal of Strategic Property Management, 27(1), 21–34. https://doi.org/10.3846/ijspm.2023.18330
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
Becker, G. S. (1996). Accounting for tastes. Harvard University Press. https://doi.org/10.4159/9780674020658
Becker, G. S., & Murphy, K. M. (2009). Social economics: market behavior in a social environment. Harvard University Press.
Boymal, J., de Silva, A., & Liu, S. (2013). Measuring the preference for dwelling characteristics of Melbourne: railway stations and house prices. In Annual Pacific-Rim Real Estate Society Conference (pp. 1–15), Melbourne, Australia.
Bryan, J., Deaton, B. J., & Weersink, A. (2015). Do landlord-tenant relationships influence rental contracts for farmland or the cash rental rate? Land Economics, 91(4), 650–663. https://doi.org/10.3368/le.91.4.650
Chicoine, D. L. (1981). Farmland values at the urban fringe: an analysis of sale prices. Land Economics, 57(3), 353–362. https://doi.org/10.2307/3146016
Coleman, J. (1990). Foundations of social theory. Belknap Press, Harvard University Press.
Dai, T., Jiang, S., Sun, A., & Wu, S. (2020). Inequality and social capital: how inequality in China’s housing assets affects people’s trust. Emerging Markets Finance & Trade, 56, 562–575. https://doi.org/10.1080/1540496X.2018.1516637
Dubé, J., Legros, D., Thériault, M., & Des Rosiers, F. (2014). A spatial difference-in-differences estimator to evaluate the effect of change in public mass transit systems on house prices. Transportation Research Part B: Methodological, 64, 24–40. https://doi.org/10.1016/j.trb.2014.02.007
Dunford, R. W., Marti, C. E., & Mittelhammer, R. C. (1985). A case study of rural land values at the urban fringe, including subjective buyer expectations. Land Economics, 6(1), 10–16. https://doi.org/10.2307/3146135
Feng, S. T., Peng, C. W., Yang, C. H., & Chen, P. W. (2021). Non-linear relationships between house size and price. International Journal of Strategic Property Management, 25(3), 240–253. https://doi.org/10.3846/ijspm.2021.14607
Gao, Y., Liu, B., Yu, L., Yang, H., & Yin, S. (2019). Social capital, land tenure and the adoption of green control techniques by family farms: evidence from Shandong and Henan provinces of China. Land Use Policy, 89, 104250. https://doi.org/10.1016/j.landusepol.2019.104250
Gwilliam, K. (1993). Farmland leasing and contract choice in Michigan: the influence of social distance [Ph.D. dissertation, Michigan State University]. East Lansing, MI.
Hasan, I., He, Q., & Lu, H. (2022). Social capital, trusting, and trustworthiness: evidence from peer-to-peer lending. Journal of Financial and Quantitative Analysis, 57(4), 1409–1453. https://doi.org/10.1017/S0022109021000259
Hilber, C. A. L. (2010). New housing supply and the dilution of social capital. Journal of Urban Economics, 67(3), 419–437. https://doi.org/10.1016/j.jue.2009.12.001
Hyden, G. (1993, November 1–4). The role of social capital in African development: illustrations from Tanzania [Paper presentation]. Seminar on improved resource management: the role of the state versus that of the local community, Jylinge, Denmark.
Kostov, P. (2010). Do buyers’ characteristics and personal relationships affect agricultural land prices? Land Economics, 86(1), 48–65. https://doi.org/10.3368/le.86.1.48
Kostov, P., Patton, M., & McErlean, S. (2008). Nonparametric analysis of the influence of buyers’ characteristics and personal relationships on agricultural land prices. Agribusiness, 24(2), 161–176. https://doi.org/10.1002/agr.20152
Lee, C. C., Liang, C. M., & Chen, C. Y. (2017). The impact of urban renewal on neighborhood housing prices in Taipei: an application of the difference-in-difference method. Journal of Housing and the Built Environment, 32(3), 407–428. https://doi.org/10.1007/s10901-016-9518-1
Li, Y., & Zhang, S. (2021). Social capital as a predictor of neighborhood satisfaction: an analysis of American housing survey national data. Housing and Society, 48(1), 1–20. https://doi.org/10.1080/08882746.2020.1813516
Lins, K. V., Servaes, H., & Tamayo, A. (2017). Social capital, trust, and firm performance: the value of corporate social responsibility during the financial crisis. The Journal of Finance, 72(4), 1785–1824. https://doi.org/10.1111/jofi.12505
Long, N. W. L. (1995). Non-agricultural influences on English farmland prices [Ph.D. thesis]. Cambridge University.
Loury, G. (1977). A dynamic theory of racial income differences. In P. Wallace & A. LaMond (Eds.), Women, minorities, and employment discrimination. Heath.
Ministry of the Interior. (2018). Real estate brokerage industry statistics. https://resim.land.moi.gov.tw/Home/PriIndex
New Taipei City Government. (2017). Study on the effects of the actual price registration system on subsequent transaction prices—example of the National Taipei University Special Zone. https://www-ws.land.ntpc.gov.tw/Download.ashx?u=LzAwMS9VcGxvYWQvMS9yZWxmaWxlLzkzNTAvNjI5NzI0L2ZhYjAyNjA1LWJiMTQtNDc5Mi1iMWMzLTBiMzQ2N2Q1NzdiMC5wZGY%3D&n=77yIMTA35bm0OOaciO%2B8ieWvpuWDueeZu%2BmMhOWItuW6puWwjeW%2BjOe6jOS6pOaYk%2BWDueagvOW9semfv%2BS5i%2BeglOepti5wZGY%3D&icon=..pdf
Neter, J., Wasserman, W., & Kutner, M. H. (1990). Applied linear statistical models: applied linear regression models (3rd ed.). Irwin.
Perry, G. M., & Robison, L. J. (2001). Evaluating the influence of personal relationships on land sale prices: a case study in Oregon. Land Economics, 77(3), 385–398. https://doi.org/10.2307/3147132
Rainey, R. L., Dixon, B. L., Parsch, L. D., Ahrendsen, B. L., & Bierlen, R. W. (2003). Landlord satisfaction with Arkansas agricultural land agreements. Journal of Agricultural and Applied Economics, 35(3), 543–553. https://doi.org/10.1017/S1074070800028273
Rainey, R. L., Dixon, B. L., Ahrendsen, B. L., Parsch, L. D., & Bierlen, R. W. (2005). Arkansas landlord selection of land-leasing contract type and terms. International Food and Agribusiness Management Review, 8(1), 1–19.
Robison, L., & Siles, M. (1999). Social capital and household income distribution in the United States: 1980, 1990. Journal of Socio-Economics, 28(1), 43–93. https://doi.org/10.1016/S1053-5357(99)00012-8
Robison, L., Myers, R., & Siles, M. (1999). Social capital, the terms of trade, and the distribution of income [Staff Paper No. 99–22]. Department of Agricultural Economics, Michigan State University, East Lansing, MI.
Robison, L., Myers, R., & Siles, M. (2002a). Social capital and the terms of trade for farmland. Review of Agricultural Economics, 24(1), 44–58. https://doi.org/10.1111/1058-7195.00005
Robison, L. J., & Schmid, A. A. (1994). Can agriculture prosper without increased social capital? Choices, 9(4), 29–31. http://www.jstor.org/stable/43644641
Robison, L. J., Schmid, A. A., & Siles, M. E. (2002b). Is social capital really capital? Review of Social Economy, 60(1), 1–21. https://doi.org/10.1080/00346760110127074
Rosen, S. (1974). Hedonic prices and implicit markets: product differentiation in pure competition. Journal of Political Economy, 82(1), 34–55. https://doi.org/10.1086/260169
Schmid, A., & Robison, L. (1995). Social capital as a factor of production. Journal of Agricultural and Applied Economics, 27(1), 59–66. https://doi.org/10.1017/S1074070800019593
Seifert, S., Kahle, C., & Hüttel, S. (2021). Price dispersion in farmland markets: what is the role of asymmetric information? American Journal of Agricultural Economics, 103(4), 1545–1568. https://doi.org/10.1111/ajae.12153
Siles, M., Hanson, S., & Robison, L. (1994). Socio-economics and the probability of loan approval. Review of Agricultural Economics, 16(3), 363–372. https://doi.org/10.2307/1349696
Siles, M., Robison, L., Johnson, B., Linne, G., & Beveridge, M. D. (2000). Farmland exchanges: selection of trading partners, terms of trade, and social capital. Journal of the American Society of Farm Managers and Rural Appraisers, 63(1), 127.
Swann, G. M. P. (1999). An economic analysis of taste – a review of Gary S Becker: accounting for tastes. International Journal of the Economics of Business, 6(2), 281–296. https://doi.org/10.1080/13571519984278
Tang, L., Ma, X., Zhou, Y., Shi, X., & Ma, J. (2019). Social relations, public interventions and land rent deviation: evidence from Jiangsu province in China. Land Use Policy, 86, 406–420. https://doi.org/10.1016/j.landusepol.2019.05.025
Taylor, M. R., & Featherstone, A. M. (2018). The value of social capital in farmland leasing relationships. Agricultural Finance Review, 78(4), 489–496. https://doi.org/10.1108/AFR-08-2017-0067
Tong, D., Zhang, Y., MacLachlan, I., & Li, G. (2020). Migrant housing choices from a social capital perspective: the case of Shenzhen, China. Habitat International, 96, 102082. https://doi.org/10.1016/j.habitatint.2019.102082
Tsoodle, L. J., Golden, B. B., & Featherstone, A. M. (2006). Factors influencing Kansas agricultural farm land values. Land Economics, 82(1), 124–139. https://doi.org/10.3368/le.82.1.124
Woolcock, M. (1998). Social capital and economic development: toward a theoretical synthesis and policy framework. Theory and Society, 27(2), 151–208. https://doi.org/10.1023/A:1006884930135
Yi, D., Huang, Y., & Fan, G. Z. (2016). Social capital and housing affordability: evidence from China. Emerging Markets Finance and Trade, 52(8), 1728–1743. https://doi.org/10.1080/1540496X.2016.1181856
Becker, G. S., & Murphy, K. M. (2009). Social economics: market behavior in a social environment. Harvard University Press.
Boymal, J., de Silva, A., & Liu, S. (2013). Measuring the preference for dwelling characteristics of Melbourne: railway stations and house prices. In Annual Pacific-Rim Real Estate Society Conference (pp. 1–15), Melbourne, Australia.
Bryan, J., Deaton, B. J., & Weersink, A. (2015). Do landlord-tenant relationships influence rental contracts for farmland or the cash rental rate? Land Economics, 91(4), 650–663. https://doi.org/10.3368/le.91.4.650
Chicoine, D. L. (1981). Farmland values at the urban fringe: an analysis of sale prices. Land Economics, 57(3), 353–362. https://doi.org/10.2307/3146016
Coleman, J. (1990). Foundations of social theory. Belknap Press, Harvard University Press.
Dai, T., Jiang, S., Sun, A., & Wu, S. (2020). Inequality and social capital: how inequality in China’s housing assets affects people’s trust. Emerging Markets Finance & Trade, 56, 562–575. https://doi.org/10.1080/1540496X.2018.1516637
Dubé, J., Legros, D., Thériault, M., & Des Rosiers, F. (2014). A spatial difference-in-differences estimator to evaluate the effect of change in public mass transit systems on house prices. Transportation Research Part B: Methodological, 64, 24–40. https://doi.org/10.1016/j.trb.2014.02.007
Dunford, R. W., Marti, C. E., & Mittelhammer, R. C. (1985). A case study of rural land values at the urban fringe, including subjective buyer expectations. Land Economics, 6(1), 10–16. https://doi.org/10.2307/3146135
Feng, S. T., Peng, C. W., Yang, C. H., & Chen, P. W. (2021). Non-linear relationships between house size and price. International Journal of Strategic Property Management, 25(3), 240–253. https://doi.org/10.3846/ijspm.2021.14607
Gao, Y., Liu, B., Yu, L., Yang, H., & Yin, S. (2019). Social capital, land tenure and the adoption of green control techniques by family farms: evidence from Shandong and Henan provinces of China. Land Use Policy, 89, 104250. https://doi.org/10.1016/j.landusepol.2019.104250
Gwilliam, K. (1993). Farmland leasing and contract choice in Michigan: the influence of social distance [Ph.D. dissertation, Michigan State University]. East Lansing, MI.
Hasan, I., He, Q., & Lu, H. (2022). Social capital, trusting, and trustworthiness: evidence from peer-to-peer lending. Journal of Financial and Quantitative Analysis, 57(4), 1409–1453. https://doi.org/10.1017/S0022109021000259
Hilber, C. A. L. (2010). New housing supply and the dilution of social capital. Journal of Urban Economics, 67(3), 419–437. https://doi.org/10.1016/j.jue.2009.12.001
Hyden, G. (1993, November 1–4). The role of social capital in African development: illustrations from Tanzania [Paper presentation]. Seminar on improved resource management: the role of the state versus that of the local community, Jylinge, Denmark.
Kostov, P. (2010). Do buyers’ characteristics and personal relationships affect agricultural land prices? Land Economics, 86(1), 48–65. https://doi.org/10.3368/le.86.1.48
Kostov, P., Patton, M., & McErlean, S. (2008). Nonparametric analysis of the influence of buyers’ characteristics and personal relationships on agricultural land prices. Agribusiness, 24(2), 161–176. https://doi.org/10.1002/agr.20152
Lee, C. C., Liang, C. M., & Chen, C. Y. (2017). The impact of urban renewal on neighborhood housing prices in Taipei: an application of the difference-in-difference method. Journal of Housing and the Built Environment, 32(3), 407–428. https://doi.org/10.1007/s10901-016-9518-1
Li, Y., & Zhang, S. (2021). Social capital as a predictor of neighborhood satisfaction: an analysis of American housing survey national data. Housing and Society, 48(1), 1–20. https://doi.org/10.1080/08882746.2020.1813516
Lins, K. V., Servaes, H., & Tamayo, A. (2017). Social capital, trust, and firm performance: the value of corporate social responsibility during the financial crisis. The Journal of Finance, 72(4), 1785–1824. https://doi.org/10.1111/jofi.12505
Long, N. W. L. (1995). Non-agricultural influences on English farmland prices [Ph.D. thesis]. Cambridge University.
Loury, G. (1977). A dynamic theory of racial income differences. In P. Wallace & A. LaMond (Eds.), Women, minorities, and employment discrimination. Heath.
Ministry of the Interior. (2018). Real estate brokerage industry statistics. https://resim.land.moi.gov.tw/Home/PriIndex
New Taipei City Government. (2017). Study on the effects of the actual price registration system on subsequent transaction prices—example of the National Taipei University Special Zone. https://www-ws.land.ntpc.gov.tw/Download.ashx?u=LzAwMS9VcGxvYWQvMS9yZWxmaWxlLzkzNTAvNjI5NzI0L2ZhYjAyNjA1LWJiMTQtNDc5Mi1iMWMzLTBiMzQ2N2Q1NzdiMC5wZGY%3D&n=77yIMTA35bm0OOaciO%2B8ieWvpuWDueeZu%2BmMhOWItuW6puWwjeW%2BjOe6jOS6pOaYk%2BWDueagvOW9semfv%2BS5i%2BeglOepti5wZGY%3D&icon=..pdf
Neter, J., Wasserman, W., & Kutner, M. H. (1990). Applied linear statistical models: applied linear regression models (3rd ed.). Irwin.
Perry, G. M., & Robison, L. J. (2001). Evaluating the influence of personal relationships on land sale prices: a case study in Oregon. Land Economics, 77(3), 385–398. https://doi.org/10.2307/3147132
Rainey, R. L., Dixon, B. L., Parsch, L. D., Ahrendsen, B. L., & Bierlen, R. W. (2003). Landlord satisfaction with Arkansas agricultural land agreements. Journal of Agricultural and Applied Economics, 35(3), 543–553. https://doi.org/10.1017/S1074070800028273
Rainey, R. L., Dixon, B. L., Ahrendsen, B. L., Parsch, L. D., & Bierlen, R. W. (2005). Arkansas landlord selection of land-leasing contract type and terms. International Food and Agribusiness Management Review, 8(1), 1–19.
Robison, L., & Siles, M. (1999). Social capital and household income distribution in the United States: 1980, 1990. Journal of Socio-Economics, 28(1), 43–93. https://doi.org/10.1016/S1053-5357(99)00012-8
Robison, L., Myers, R., & Siles, M. (1999). Social capital, the terms of trade, and the distribution of income [Staff Paper No. 99–22]. Department of Agricultural Economics, Michigan State University, East Lansing, MI.
Robison, L., Myers, R., & Siles, M. (2002a). Social capital and the terms of trade for farmland. Review of Agricultural Economics, 24(1), 44–58. https://doi.org/10.1111/1058-7195.00005
Robison, L. J., & Schmid, A. A. (1994). Can agriculture prosper without increased social capital? Choices, 9(4), 29–31. http://www.jstor.org/stable/43644641
Robison, L. J., Schmid, A. A., & Siles, M. E. (2002b). Is social capital really capital? Review of Social Economy, 60(1), 1–21. https://doi.org/10.1080/00346760110127074
Rosen, S. (1974). Hedonic prices and implicit markets: product differentiation in pure competition. Journal of Political Economy, 82(1), 34–55. https://doi.org/10.1086/260169
Schmid, A., & Robison, L. (1995). Social capital as a factor of production. Journal of Agricultural and Applied Economics, 27(1), 59–66. https://doi.org/10.1017/S1074070800019593
Seifert, S., Kahle, C., & Hüttel, S. (2021). Price dispersion in farmland markets: what is the role of asymmetric information? American Journal of Agricultural Economics, 103(4), 1545–1568. https://doi.org/10.1111/ajae.12153
Siles, M., Hanson, S., & Robison, L. (1994). Socio-economics and the probability of loan approval. Review of Agricultural Economics, 16(3), 363–372. https://doi.org/10.2307/1349696
Siles, M., Robison, L., Johnson, B., Linne, G., & Beveridge, M. D. (2000). Farmland exchanges: selection of trading partners, terms of trade, and social capital. Journal of the American Society of Farm Managers and Rural Appraisers, 63(1), 127.
Swann, G. M. P. (1999). An economic analysis of taste – a review of Gary S Becker: accounting for tastes. International Journal of the Economics of Business, 6(2), 281–296. https://doi.org/10.1080/13571519984278
Tang, L., Ma, X., Zhou, Y., Shi, X., & Ma, J. (2019). Social relations, public interventions and land rent deviation: evidence from Jiangsu province in China. Land Use Policy, 86, 406–420. https://doi.org/10.1016/j.landusepol.2019.05.025
Taylor, M. R., & Featherstone, A. M. (2018). The value of social capital in farmland leasing relationships. Agricultural Finance Review, 78(4), 489–496. https://doi.org/10.1108/AFR-08-2017-0067
Tong, D., Zhang, Y., MacLachlan, I., & Li, G. (2020). Migrant housing choices from a social capital perspective: the case of Shenzhen, China. Habitat International, 96, 102082. https://doi.org/10.1016/j.habitatint.2019.102082
Tsoodle, L. J., Golden, B. B., & Featherstone, A. M. (2006). Factors influencing Kansas agricultural farm land values. Land Economics, 82(1), 124–139. https://doi.org/10.3368/le.82.1.124
Woolcock, M. (1998). Social capital and economic development: toward a theoretical synthesis and policy framework. Theory and Society, 27(2), 151–208. https://doi.org/10.1023/A:1006884930135
Yi, D., Huang, Y., & Fan, G. Z. (2016). Social capital and housing affordability: evidence from China. Emerging Markets Finance and Trade, 52(8), 1728–1743. https://doi.org/10.1080/1540496X.2016.1181856