This paper examines how the international demand for luxury consumption affects the
real estate market in global hotspots. Using a unique data set of housing transactions in
Paris, we find that (i) non-resident foreigners crowd out residents in highly desirable areas of the city, especially in good times; (ii) these non-residents overpay and realize lower capital gains when reselling; and (iii) purchases by non-resident foreigners have a causal positive effect on price levels. Our results illustrate the importance of foreign buyers—and their tastes—in attractive locations worldwide.