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The effects of tourism on housing prices: applying a difference-in-differences methodology to the Portuguese market

International journal of housing markets and analysis, 2022-06, Vol.15 (4), p.762-779 [Peer Reviewed Journal]

António Manuel Cunha and Júlio Lobão. ;António Manuel Cunha and Júlio Lobão. This work is published under http://creativecommons.org/licences/by/4.0/legalcode (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 1753-8270 ;EISSN: 1753-8289 ;DOI: 10.1108/IJHMA-04-2021-0047

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  • Title:
    The effects of tourism on housing prices: applying a difference-in-differences methodology to the Portuguese market
  • Author: Cunha, António Manuel ; Lobão, Júlio
  • Subjects: Apartments ; Cities ; Economic activity ; Foreign residents ; Housing ; Housing needs ; Housing prices ; Liberalization ; Licenses ; Methodology ; Municipalities ; Population ; Pricing ; Real estate ; Regression models ; Rentals ; Statistical analysis ; Tourism
  • Is Part Of: International journal of housing markets and analysis, 2022-06, Vol.15 (4), p.762-779
  • Description: Purpose This paper aims to explore the effects of a surge in tourism short-term rentals (STR) on housing prices in municipalities within Portugal’s two largest Metropolitan Statistical Areas. Design/methodology/approach This study applies the difference-in-differences (DiD) methodology by using a feasible generalized least squares (FGLS) estimator in a seemingly unrelated regression (SUR) equation model. Findings The results show that the liberalization of STR had a significant impact on housing prices in municipalities where a higher percentage of housing was transferred to tourism. This transfer led to a leftward shift in the housing supply and a consequent increase in housing prices. These price increases are much higher than those found in previous studies on the same subject. The authors also found that municipalities with more STR had low housing elasticities, which indicates that adjustments to the transfer of real estate from housing to tourism were made by increasing house prices, and not by increasing supply quantities. Practical implications The study suggests that an unforeseen consequence of allowing property owners to transfer the use of real estate from housing to other services (namely, tourism) was extreme housing price increases due to inelastic housing supply. Originality/value This is the first time that the DiD methodology has been applied in real estate markets using FGLS in a SUR equation model and the authors show that it produces more precise estimates than the baseline OLS FE. The authors also find evidence of a supply shock provoked by STR.
  • Publisher: Bingley: Emerald Publishing Limited
  • Language: English
  • Identifier: ISSN: 1753-8270
    EISSN: 1753-8289
    DOI: 10.1108/IJHMA-04-2021-0047
  • Source: ProQuest Central
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