Dynamic and Static Asking Prices in the Sydney Housing Market

This paper investigates the impact of two commonly used asking price strategies on house sales prices. In particular, we compare a dynamic asking price, where the seller adjusts her asking price over time as she fails to sell her property, with a static asking price, where the seller sets an asking price and sticks to it until the property is sold. While we show this comparison to be ambiguous from a theoretical perspective, our empirical study, using a comprehensive dataset of the properties sold in the greater Sydney region in 2011, indicates that properties with a dynamic asking price sold, on average, for approximately 1.9 per cent less than properties with a static asking price. In addition, we show that, controlling for the asking price strategy, the duration of sale has a significant impact on sales prices.