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

António Manuel Cunha and Júlio Lobão

International Journal of Housing Markets and Analysis, 2021, vol. 15, issue 4, 762-779

Abstract: 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.

Keywords: Elasticities; Housing; Tourism; Difference-in-differences; Real estate prices; Short-term rentals (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:ijhmap:ijhma-04-2021-0047

DOI: 10.1108/IJHMA-04-2021-0047

Access Statistics for this article

International Journal of Housing Markets and Analysis is currently edited by Dr Richard Reed

More articles in International Journal of Housing Markets and Analysis from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().