Skip to main content
SpringerLink
Log in

Effects of Immigration on Local Housing Markets

  • Chapter
  • First Online:
The Economic Geography of Cross-Border Migration

Part of the book series: Footprints of Regional Science ((VRS))

Abstract

This chapter surveys the international evidence regarding the impact of immigration on local housing markets. The theoretical framework provided highlights with the complexity of housing markets and the importance of distinguishing between the ownership and use of the stock of dwellings vis-à-vis the residential real estate market. Evidence from eight countries, and from meta-analysis shows that immigration leads to higher house prices and rents, and lower housing affordability. On average, a 1% increase in immigration in a city increases rents by 0.5–1%, the effect on prices being about double that. There is a large variance around this, related inter alia to the period, spatial scale and local economic conditions. Additionally, the housing impact of immigration depends on the demographic and economic composition of the immigrant flow, on macroeconomic conditions and expectations, on the institutional factors influencing the price elasticity of the supply of new dwellings and on how the native born react to immigration. The tendency of the native born to move from areas where migrants settle can lead to relative house price declines in these areas. Overall, immigration has been a minor contributor to sharply rising house prices in contemporary fast growing agglomerations.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 149.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 199.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 199.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Similar content being viewed by others

Notes

  1. 1.

    The assumptions under which P = R/i holds include: no depreciation, a perfectly competitive housing market and an absence of government intervention in the market. Clearly, in more realistic markets the relationship is mathematically more complicated but P and R remain nonetheless often strongly correlated.

  2. 2.

    The case of a migrant household sharing a dwelling with a resident household (often earlier migrants), can potentially lead to a high person to floor area occupancy rate, also referred to as residential crowding (Burr et al. 2010).

  3. 3.

    For census purposes Statistics Canada divides the country into 289 census divisions. These are intermediate in the spatial hierarchy between municipality (smaller) and province/territory (larger) (Akbari and Aydede 2012, p. 1649).

  4. 4.

    Two instruments are used; one based on the settlement patterns of past migrants (ethnic networks) and another based on geographic accessibility (“gateways”) (Gonzalez & Ortega 2013, pp. 42–43).

  5. 5.

    The desire for homophily does not necessarily suggest that the native born are opposed to diversity. For example, the effect of greater ethnic diversity on the variety of ethnic cuisine offered in cities has been shown to be a positive amenity effect of greater immigration that may increase property prices (Bakens et al. 2018).

  6. 6.

    See https://www.economist.com/graphic-detail/2017/03/09/global-house-prices, accessed 21/9/2018.

  7. 7.

    See for example the recent study by Li and Tang (2018) on the case of immigration impacts in Singapore, in which public housing is only available to the native population.

  8. 8.

    We acknowledge, and incorporated, some suggestions for future research provided by two anonymous referees.

References

  • Accetturo, A., Manaresi, F., Mocetti, S., & Olivieri, E. (2014). Don’t stand so close to me: The urban impact of immigration. Regional Science and Urban Economics, 45, 45–56.

    Article  Google Scholar 

  • Adams, Z. & Blickle, K. (2018). Immigration and the displacement of incumbent households. Working Papers on Finance 2018/8. University of St.Gallen.

    Google Scholar 

  • Ainge Roy, E. (2018). Tenants on our own land: New Zealand bans sale of homes to foreign buyers. The Guardian. Retrieved August 15, 2018, from https://www.theguardian.com/world/2018/aug/15/tenants-on-our-own-land-new-zealand-bans-sale-of-homes-to-foreign-buyers.

  • Aitken, A. (2014). The effects of immigration on house prices and rents: Evidence from england and wales. Mimeo: Royal Holloway, University of London.

    Google Scholar 

  • Akbari, A. H., & Aydede, Y. (2012). Effects of immigration on house prices in Canada. Applied Economics, 44(13), 1645–1658.

    Article  Google Scholar 

  • Bakens, J., Florax, R.J.G.M., de Groot, H.L.F., & Mulder, P. (2018). Living apart together: The economic value of ethnic diversity in cities. Tinbergen Institute Discussion Paper TI 2018–029/VIII. Amsterdam: Tinbergen Institute.

    Google Scholar 

  • Bedford, R. & Didham, R. (2018). Immigration: an election issue that has yet to be addressed? Kōtuitui: New Zealand Journal of Social Sciences Online, 1–18.

    Google Scholar 

  • Bedford, R. D., & Poot, J. (2010). Changing Tides in the South Pacific: Immigration to Aotearoa New Zealand. In U. A. Segal, D. Elliott, & N. S. Mayadas (Eds.), Immigration worldwide (pp. 257–273). New York, NY: Oxford University Press.

    Google Scholar 

  • Bodvarsson, O. B., & Van den Berg, H. F. (2013). The Economics of immigration: Theory and policy. New York: Springer.

    Book  Google Scholar 

  • Braakmann, N. (2016). Immigration and the property market: Evidence from England and Wales. Real Estate Economics.

    Google Scholar 

  • Burr, J. A., Mutchler, J. E., & Gerst, K. (2010). Patterns of residential crowding among Hispanics in later life: Immigration, assimilation, and housing market factors. Journals of Georontology: Series B, 65B(6), 772–782.

    Article  Google Scholar 

  • Chiswick, B.R. & Miller, P.W. (eds.) (2015). Handbook on the economics of international migration, Vol. 1A&1B. Amsterdam: Elsevier.

    Google Scholar 

  • Cochrane, W., & Poot, J. (2016). Past research on the impact of international migration on house prices: Implications for Auckland. Wellington, New Zealand: Ministry of Business, Innovation and Employment.

    Google Scholar 

  • Coleman, A., & Landon-Lane, J. (2007). Housing markets and migration in New Zealand, 1962–2006 (No. DP2007/12). Wellington: Reserve Bank of New Zealand.

    Google Scholar 

  • d’Albis, H., Boubtane, E. & Coulibaly, D. (2017). International migration and regional housing markets: Evidence from France. IZA DP 10516. Bonn: IZA Institute of Labor Economics.

    Google Scholar 

  • Degen, K., & Fischer, A. M. (2017). Immigration and Swiss house prices. Swiss Journal of Economics and Statistics, 153(1), 15–36.

    Article  Google Scholar 

  • DiPasquale, D., & Wheaton, W. (1995). Urban economics and real estate markets. Upper Saddle River, NJ: Prentice Hall.

    Google Scholar 

  • Fallis, G. (1985). Housing economics. Oxford: Butterworth and Co.

    Google Scholar 

  • Fry, J. (2014). Migration and macroeconomic performance in New Zealand: Theory and evidence. Working Paper 14/10. Wellington: New Zealand Treasury.

    Google Scholar 

  • Gonzalez, L., & Ortega, F. (2013). Immigration and housing booms: Evidence from Spain. Journal of Regional Science, 53(1), 37–59.

    Article  Google Scholar 

  • Greenaway-McGrevy, R., & Phillips, P. C. B. (2016). Hot property in New Zealand: Empirical evidence of housing bubbles in the metropolitan centres. New Zealand Economic Papers, 50(1), 88–113.

    Article  Google Scholar 

  • Hanushek, E. A., & Quigley, J. M. (1980). What is the price elasticity of housing demand? The Review of Economics and Statistics, 62(3), 449–454.

    Article  Google Scholar 

  • Hatton, T. J. (2014). The economics of international migration: a short history of the debate. Labour Economics, 30, 43–50.

    Article  Google Scholar 

  • Hyslop, D., Le, T., Maré, D.C., & Stillman, S. (2019). Housing markets and migration—Evidence from New Zealand. Motu Working Paper. Wellington: Motu Economic and Public Policy Research.

    Google Scholar 

  • Hodgson, R., & Poot, J. (2010). New Zealand research on the economic impacts of immigration 2005–2010: Synthesis and research agenda. Wellington: Department of Labour.

    Google Scholar 

  • Land Information New Zealand (LINZ). (2017). Understanding tax residency data. Retrieved August 8, 2018, from www.linz.govt.nz/understanding-tax-residency-data.

  • Land Information New Zealand (LINZ). (2018). Overseas investment amendment bill given royal assent. Retrieved August 25, 2018, from https://www.linz.govt.nz/news/2018-08/overseas-investment-amendment-bill-given-royal-assent.

  • Larkin, M. P., Askarov, Z., Doucouliagos, C., Dubelaar, C., Klona, M., Newton, J., et al. (2018). Do house prices sink or ride the wave of immigration? IZA DP 11497. Bonn: IZA Institute of Labor Economics.

    Google Scholar 

  • Levin, E., Montagnoli, A., & Wright, R. E. (2009). Demographic change and the housing market: Evidence from a comparison of Scotland and England. Urban Studies, 46(1), 27–43.

    Article  Google Scholar 

  • Li, X., & Tang, Y. (2018). When natives meet immigrants in public and private housing markets. Journal of Housing Economics, 71, 30–44.

    Article  Google Scholar 

  • Longhi, S., Nijkamp, P., & Poot, J. (2005). A meta-analytic assessment of the effect of immigration on wages. Journal of Economic Surveys, 19(3), 451–477.

    Article  Google Scholar 

  • Longhi, S., Nijkamp, P., & Poot, J. (2010). Meta-analyses of labour market impacts of immigration: Key conclusions and policy implications. Environment and Planning C: Government and Policy, 28, 819–833.

    Article  Google Scholar 

  • Malpezzi, S., & Maclennan, D. (2001). The long-run price elasticity of supply of new residential construction in the United States and the United Kingdom. Journal of Housing Economics, 10(3), 278–306.

    Article  Google Scholar 

  • Mankiw, N. G., & Weil, D. N. (1989). The baby boom, the baby bust, and the housing market. Regional Science and Urban Economics, 19(2), 235–258.

    Article  Google Scholar 

  • McDonald, C. (2013). Migration and the housing market (AN2013/10). Wellington: Reserve Bank of New Zealand.

    Google Scholar 

  • Mclennan, D. (1982). Housing economics. Boston: Addison-Wesley Longman.

    Google Scholar 

  • Mishan, E. J., & Needleman, L. (1966). Immigration, excess aggregate demand and the balance of payments. Economica, 33(130), 129–147.

    Article  Google Scholar 

  • Mussa, A., Nwaogu, U. G., & Pozo, S. (2017). Immigration and housing: A spatial econometric analysis. Journal of Housing Economics, 35(1), 13–25.

    Article  Google Scholar 

  • Muth, R. F., & Goodman, A. C. (1989). The economics of housing markets. Reading UK: Harwood Academic Publishers.

    Google Scholar 

  • Nijkamp, P., Poot, J., & Sahin, M. (Eds.). (2012). Migration impact assessment: New horizons. Cheltenham UK: Edward Elgar.

    Google Scholar 

  • Norman, N. R., & Meikle, K.F. (1985). The economic effects of immigration in Australia: Committee for the economic development of Australia (CEDA) and Department of Immigration and Ethnic Affairs.

    Google Scholar 

  • O’Sullivan, A. (2019). Urban economics (9th ed.). New York: McGraw-Hill.

    Google Scholar 

  • Painter, G., Gabriel, S., & Myers, D. (2001). Race, immigrant status and housing tenure choice. Journal of Urban Economics, 49(1), 150–167.

    Article  Google Scholar 

  • Poot, J., Nana, G., & Philpott, B. P. (1988). International migration and the New Zealand economy: Long-run perspective. Wellington: Institute of Policy Studies.

    Google Scholar 

  • Poot, J. (2000). Economic principles for the building sector: A New Zealand text. Revised Edition. Wellington: School of Architecture, Victoria University of Wellington.

    Google Scholar 

  • Sá, F. (2015). Immigration and house prices in the UK. The Economic Journal, 125(587), 1393–1424.

    Article  Google Scholar 

  • Saiz, A. (2003). Room in the kitchen for the melting pot: Immigration and rental prices. Review of Economics and Statistics, 85(3), 502–521.

    Article  Google Scholar 

  • Saiz, A. (2007). Immigration and housing rents in American cities. Journal of Urban Economics, 61(2), 345–371.

    Article  Google Scholar 

  • Saiz, A. & Wachter, S. (2011). Immigration and the neighborhood. American Economic Journal–Economic Policy, 3(2), 169–188.

    Google Scholar 

  • Sanchis-Guarner, R. (2017). Decomposing the impact of immigration on house prices. CReAM Discussion Paper CDP 06/17. London: Centre for Research and Analysis of Migration, University College London.

    Google Scholar 

  • Smith, C. & Thoenissen, C. (2018). Migration and business cycle dynamics. Discussion Paper No. 2018/07. Wellington: Reserve Bank of New Zealand.

    Google Scholar 

  • Stillman, S., & Maré, D. (2008). Housing markets and migration: Evidence from New Zealand. Wellington: Department of Labour.

    Book  Google Scholar 

  • Treasury, The. (2018). Screening of residential land: Questions and answers. Wellington: New Zealand Treasury.

    Google Scholar 

  • Zhu, J., Brown, S., & Pryce, G. B. (2018). Immigration and house prices under various regional economic structures in England and Wales. Urban Studies. https://doi.org/10.1177/0042098018777420.

    Article  Google Scholar 

Download references

Acknowledgements

This chapter builds on a report commissioned by the New Zealand Ministry of Business Innovation and Employment (MBIE) (see Cochrane and Poot 2016).

Author information

Authors and Affiliations

  1. School of Social Sciences, Faculty of Arts and Social Sciences, University of Waikato, Private Bag 3105, Hamilton, 3240, New Zealand

    William Cochrane

  2. Department of Spatial Economics, Vrije Universiteit Amsterdam, De Boelelaan 1105, 1081 HV, Amsterdam, The Netherlands

    Jacques Poot

  3. National Institute of Demographic and Economic Analysis, University of Waikato, Private Bag 3105, Hamilton, 3240, New Zealand

    Jacques Poot

Authors
  1. William Cochrane
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Jacques Poot
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to William Cochrane .

Editor information

Editors and Affiliations

  1. Jheronimus Academy of Data Science, 'S-Hertogenbosch, Noord-Brabant, The Netherlands

    Karima Kourtit

  2. McMaster University, Hamilton, ON, Canada

    Bruce Newbold

  3. Jheronimus Academy of Data Science, 'S-Hertogenbosch, Noord-Brabant, The Netherlands

    Peter Nijkamp

  4. The Ohio State University, Columbus, OH, USA

    Mark Partridge

Rights and permissions

Reprints and permissions

Copyright information

© 2021 The Author(s), under exclusive license to Springer Nature Switzerland AG

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Cochrane, W., Poot, J. (2021). Effects of Immigration on Local Housing Markets. In: Kourtit, K., Newbold, B., Nijkamp, P., Partridge, M. (eds) The Economic Geography of Cross-Border Migration. Footprints of Regional Science(). Springer, Cham. https://doi.org/10.1007/978-3-030-48291-6_12

Download citation

Publish with us

Policies and ethics

Search

Navigation