Competition of Real Estate Brokers and Housing Prices

This paper analyzes how the competition among real estate brokers impacts housing prices in a typical sellers’ market in China. In a theoretical model, we discover a broker competition mechanism in which brokers compete for listings by promising higher transaction prices and compete for buyers by exerting more effort, and thus its effect on housing prices. We further examine how large the effect is with a merged dataset of housing listings and transaction records in Beijing in 2016 and 2017. We find that the competition in the brokerage market raises housing prices significantly. We also find that exclusive agency and the broker’s effort positively relate to higher housing prices. It is found that the number of brokers extends the time on market of houses. These results support our argument on broker competition mechanism. In addition, we find a stronger impact of broker competition on housing prices in a hotter market