This is the first of a two-part series on the effect of superstitious belief on the real estate market. The second installment will appear in a future Behavior & Belief column.

I recently discovered a disturbing fact: my home office is in the northwest corner of my house, which is very bad. Furthermore, I often sit in my home office facing northwest, which is also very bad. So said Los Angeles feng shui expert Carol Assa in a New York Times article published last year (Eng 2019). Assa said I might be able to improve the feng shui of my home by placing six feng shui coins tied with red string in the southwest corner of my house. While writing this column, I did buy six feng shui coins tied with red string, but I have no intention of putting them in the southwest corner of my home. I just thought they looked pretty. However, despite all these foreboding signs, I can take comfort from the fact that feng shui is an ancient Chinese pseudoscience with no evidence to support it (Matthews 2018). Maybe I won’t have to move my home office after all.

Feng shui is a belief system based on the concept of chi (or qi), the life force that is a foundational belief in Chinese traditional medicine and purported to be present in humans and all nature. Feng shui is a form of geomancy that, when applied to residential houses as well as to commercial and public buildings, suggests that the design of the building and its placement in the surrounding landscape will affect the fortunes and well-being of its inhabitants (Matthews 2018). In 1949, when Communists rose to power in mainland China, feng shui was labelled an unscientific, anti-Marxist superstition and outlawed. The crackdown intensified during the Cultural Revolution of 1966–1976. But feng shui remained popular in Hong Kong, Taiwan, and among Chinese populations outside of China. As the Chinese economy has opened up in recent decades, feng shui has regained popularity in the People’s Republic of China, particularly among the wealthy (Coonan 2011). Today there are several different schools of feng shui, and feng shui advisors offer their services throughout Asia but also in Europe and the United States. In addition to making recommendations about the setting and landscaping of a home, many feng shui consultants advise home owners on interior design in an effort to harmonize dwellings with the local flow of chi.

The remarkable rise of the Chinese economy has stimulated increased interest in consumer research on Chinese superstitions—particularly as they might be employed to increase profits. For example, red is a color associated with good luck in Chinese culture. Wedding dresses are often red, as are many other objects. Researchers Thomas Kramer and Lauren Block (2007) found that Chinese consumers would be more satisfied after the product failure of a rice cooker if it were a lucky red color than if it were a neutral green.

Similarly, the number four is unlucky in Chinese culture because when spoken it sounds like the word death. Alternatively, the number eight is considered good luck because it sounds like the word for wealth or prosper (Vyse 2019). In another study, Kramer and Block (2007) found that Taiwanese consumers were more likely to buy a portable radio when the price was higher but included lucky eights (TW$888) than when it was lower but made up of neutral numbers (TW$777). Similarly, consumers were more likely to buy a digital camera that had a higher price made up of neutral numbers (TW$6,555.55) than one priced lower but including unlucky numbers (TW$6,444.44). This research shows how belief in Chinese number superstitions is both irrational and potentially costly.

A brief aside about eight. The number eight is remarkably pervasive in Chinese society due to its association with good luck. The opening ceremonies of the Twenty-Ninth Summer Olympics in Beijing started at 8:08 p.m. on August (the eighth month) 8, 2008 (Kramer and Block 2007). Similarly, in 2003, Sichuan Airlines bought the phone number 8888-8888 (eight eights) at auction for the equivalent of $280,000 (Vyse 2019). They intended to use it as their customer service number.

It is clear that retailers are conscious of the superstitious implications of their product pricing. One study recorded the prices of products advertised in several newspapers from Shanghai, Taiwan, and Hong Kong. Sampling a total of 499 items, the researchers found that advertised prices ended in eight significantly more than any other digit—on 39.9 percent of items. Prices ending in four were the least likely, occurring on 1.4 percent of items, a rate significantly lower than the 10 percent expected by chance (Simmons and Schindler 2003). Finally, a recent study of transactions on the Hong Kong Stock Exchange showed that traders were particularly attracted to stock trades with lot numbers ending in eight, despite the fact that lot numbers are assigned arbitrarily (Chen et al. 2019).

 

Feng Shui in the Real Estate Market

Buying a home is one of the most important financial decisions a person can make, and subscribing to Chinese superstitions can make it even more costly. Several studies have attempted to identify the variables that are important in the Chinese housing market. Hong Kong has been an excellent laboratory for this research for two reasons: (1) it is a hotbed of traditional Chinese superstitions; and (2) much of the housing is in high-rise apartments. This last point makes it easy to look at the effect of lucky and unlucky floors on the price of Hong Kong apartments. According to tradition, apartments on floors 4, 14, 24, 34, etc., would be considered bad luck, and apartments on floors 8, 18, 28, etc., would be good luck. It appears that floor number is an important variable in Hong Kong real estate, but the research findings have been somewhat inconsistent. For example, a study published in 2001 (Chau et al. 2001) showed that, in housing boom periods, home buyers were willing to pay 2.8 percent more for an apartment on a floor ending in eight. They found no effect of unlucky floor numbers. In contrast, a study published six years later found no effect of lucky floor numbers but significant negative effect on the price of floor numbers ending in four (Choy et al. 2007). Go figure.

A more recent study using houses, rather than apartments, appears to show a much clearer effect of lucky numbers in the real estate market for Chinese customers. The researchers used data on approximately 117,000 house transactions combined with census data for several neighborhoods in the Vancouver area, which is home to a large number of Chinese immigrants (Fortin et al. 2014). The researchers found that, even without controlling for the number of Chinese residents in the area, houses with addresses ending in four were 3.1 percent lower in price than average, and those ending in an eight were 3.4 percent more expensive. Furthermore, for each additional percentage of Chinese residents in a neighborhood, the superstitious effect of fours increased by 5.5 percent and of eights by 6.4 percent. In non-Chinese neighborhoods, there was no effect of either of these numbers on housing prices.

A 2012 study conducted in Taiwan examined six features of a home that are thought to bring bad feng shui (Lin et al. 2012):

Bad Feng Shui Features

1. Lu-chun, which means the house is at the end of a street facing directly down the street.
2. The house is on a dead-end road. It is thought that because the street lacks a free flow, it may acquire stagnant chi.
3. Near a viaduct. A house near a viaduct will appear to be cut by the viaduct, making the people inside uncomfortable.
4. Near a cemetery or funeral parlor. The house may acquire yin-chi, a bad form of chi that accumulates around the dead.
5. Near a temple or shrine. Chinese people burn money printed on joss paper—a coarse paper typically made from bamboo—in the temple as an offering to ancestors. It is thought that this activity can pollute the nearby air.
6. On the fourth floor. Four is an unlucky number.

The researchers found that out of these six variables, five had statistically significant negative effects on home prices in Taiwan. The prices for homes with lu-chun were lower than those without lu-chun, but the effect was not significant. In addition, the researchers found that, in general, the effects of feng shui on real estate prices were larger on more expensive homes, a finding consistent with past results.

It is clear that feng shui is deeply embedded in Chinese culture and has a powerful effect on Chinese customers in the real estate market. If you were a shrewd non-superstitious buyer, you could get a bargain on a forty-fourth floor apartment in Hong Kong, but if you are at all concerned about resale value, you might want to think twice. As the number of wealthy Chinese has grown, many are buying real estate in the United States, and as a result the principles of feng shui are playing a larger role in the market here. A 2015 New York Times article reported that when a Dallas real estate broker made videos of his properties to send to China, he brought a compass with him so that he could prove that a house had the north-south orientation required for good feng shui (Searcey and Bradsher 2015). Other real estate offices employ feng shui consultants to assist their customers.

For those who would like to see less superstition in the world, feng shui and other Chinese superstitions appear unlikely to disappear any time soon, because they so completely saturate the economic environment. In European culture, people fear black cats, the number thirteen, and walking under ladders, but Western traditional superstitions are rarely harnessed for financial gain. In contrast, the color red, lucky and unlucky numbers, and the principles of feng shui are everywhere in Chinese culture, and they have powerful financial implications. In the immortal words of Groucho Marx, “Love flies out the door when money comes innuendo.” The same could be said for science and reason. Superstition is very difficult to combat when it is supported by the profit motive.

As for my office in the northwest corner of my home, the recommendations Carol Assa, the Los Angeles feng shui expert, made were for 2019 (Eng 2019), which happened to be a remarkably good year for me and particularly good for the things I produced in my home office. Assa may have different recommendations for 2020, but I don’t think I’ll bother to consult her.

 

References

Chau, K.W., V.S.M. Ma, and D.C.W. Ho. 2001. The pricing of ‘luckiness’ in the apartment market. Journal of Real Estate Literature 9(1): 29–40.

Chen, Tao, Andreas Karathanasopoulos, Stanley Iat-Meng Ko, et al. 2019. Lucky lots and unlucky investors. Review of Quantitative Finance and Accounting. Available online at https://doi.org/10.1007/s11156-019-00805-8.

Choy, Lennon H.T., Stephen W.K. Mak, and Winky K.O. Ho. 2007. Modeling Hong Kong real estate prices. Journal of Housing and the Built Environment 22(4): 359–68. Available online at https://doi.org/10.1007/s10901-007-9.

Coonan, Clifford. 2011. The feng-shui revolution. The Independent (October 22). Available online at https://www.independent.co.uk/news/world/asia/the-feng-shui-revolution-769756.html.

Eng, Dinah. 2019. Seeking a harmonious life with feng shui. The New York Times (March 26). Available online at https://www.nytimes.com/2019/03/26/realestate/feng-shui-tips-harmonious-home.html.

Fortin, Nicole M., Andrew J. Hill, and Jeff Huang. 2014. Superstition in the housing market. Economic Inquiry 52(3): 974–93. Available online at https://doi.org/10.1111/ecin.12066.

Kramer, Thomas, and Lauren Block. 2007. Conscious and nonconscious components of superstitious beliefs in judgment and decision making. Journal of Consumer Research 34. Available online at https://doi.org/10.1086/523288.

Lin, Chu-Chia, Chien-Liang Chen, and Ya-Chien Twu. 2012. An estimation of the impact of feng-sui on housing prices in Taiwan: An application of quantile regression. International Real Estate Review 15(3): 325–46.

Matthews, Michael R. 2018. Feng shui: Educational responsibilities and opportunities. In History, Philosophy and Science Teaching edited by Michael Matthews. Cham, Switzerland: Springer, 3–41.

Searcey, Dionne, and Keith Bradsher. 2015. Chinese cash floods U.S. real estate market. The New York Times (November 28). Available online at https://www.nytimes.com/2015/11/29/business/international/chinese-cash-floods-us-real-estate-market.html.

Simmons, Lee C., and Robert M. Schindler. 2003. Cultural superstitions and the price endings used in Chinese advertising. Journal of International Marketing 11(2): 101–11. Available online at https://doi.org/10.1509/jimk.11.2.101.20161.

Vyse, Stuart. 2019. Superstition: A Very Short Introduction. Oxford: Oxford University Press.