Home advantage: the preference for local residential real estate

Do `home-biased' residential real estate investors purchase and perform differently than those investors who look for opportunities further away? We identify a large sample of investors in the residential property market and measure the proximity of their purchase from their existing residential location. It is hypothesised that, in line with the results of home bias in other investment markets such as equities, there is a preference among residential real estate investors to buy locally and that this bias affects their returns. The home bias can be used to optimise housing market lending criteria and to inform housing investment policy. It should also be considered in household portfolio allocation decisions and has broad implications for how psychology affects financial decision-making.