Cultural Distance and Housing Prices: Evidence from the Australian Housing Market

Abstract

We investigate whether the cultural distance between a homebuyer’s ethnicity and that of the neighborhood affects a homebuyer’s location choice of the home and the home’s transaction price. Utilizing individual home sales data of culturally diverse Sydney, Australia, we find homebuyers are more likely to choose neighborhoods with a shorter cultural distance, and are willing to pay a premium for homes in those locations, consistent with homebuyers’ preference for similar cultures. Home culture preference is stronger for ethnicities from recent migration waves, particularly Asia. Our results are robust to endogeneity and self-selection concerns. The findings have implications on the role of cultural and demographic shifts on housing prices.