Rumour of administrative division adjustment and regional housing markets: housing listings, prices and speculation.

We trace the rumour that two undeveloped regions were to be administratively merged into Beijing, which is the capital of China. Applying a difference-in-difference approach, we find that housing listing prices in the two undeveloped regions declined by 25.1% after local governments clarified the rumour. Our results are robust after considering possible confounders such as contemporary housing market policies, business cycles and migrations. The price reduction caused by the rumour collapse averages to 347–396 thousand yuan, a comparable number to the value of 'Hukou' in Beijing. Finally, we show that herding and speculation accelerate the price bust after the rumour collapses. [ABSTRACT FROM AUTHOR]