Psychological Effects of Air Pollution: Evidence from House Viewings

We investigate the effect of air quality on the day of house viewing on final transaction prices. Using transaction-level data from Beijing that link individual house viewings to transaction outcomes and daily pollution levels, we find that higher pollution on the viewing day is associated with significantly higher final transaction prices, which does not appear to be driven by long-run local air quality. This price premium is especially pronounced for properties near amenities that can mitigate pollution exposure. We interpret these findings as evidence of projection bias, highlighting a novel behavioral channel through which transient environmental conditions may distort real estate valuation and decision-making.