Abstract
This paper addresses the interplay between demographics and housing market dynamics in Haifa, Israel. In the 1990s the city of Haifa, with a population of approximately 220,000, absorbed about 45,000 immigrants. The case of Haifa offers a typical non-controlled experiment on how demographic shocks and associated changes in housing demand affect the housing market. The dynamic adjustment of house prices is estimated using an autoregressive, distributed lag ADL model, taking into account spatial spillover effects. The data analyzed cover housing transactions in Haifa between January 1989 and June 1999. The data come from a mortgage database. We used a house price index by tract and by year to investigate the impact of immigration on house price dynamics for a balanced panel of 34 tracts and 11 years. Tests showed that for some of the tracts house price series are not unit root. Most individual series though indicated that a unit root could not be rejected so that we considered house price series as being non-stationary. Also, the hypothesis of no co-integration could not be rejected by the data. Due to inertia we considered lagged spatial spillover effects for the dependent variable. We applied the corrected least squares dummy variable estimator to estimate the parameters of interest. The estimates of the coefficient of the lagged dependent variable suggest stability of the ADL structure. Furthermore, the results indicate a house price correction of almost 70% of the gap between house prices and its fundamental determinants each year. Our results suggest a substantially faster response after the demand shock in Haifa than obtained by others for other cities and regions in the literature. Yet our estimates seem not unreasonable given the large-scale land conversion and urban construction programs in Israel and underline the importance of a responsive supply to dampen house price rises after an unanticipated demographic shock.
Article PDF
Similar content being viewed by others
Avoid common mistakes on your manuscript.
References
Alperovich G (1997) Israeli settlement in occupied territories and its impact on housing prices in Israel. J Reg Sci 37: 127–144
Arellano M, Bond S (1991) Some tests of specification for panel data: Monte Carlo evidence of an application to employment equations. Rev Econ Stud 58: 277–297
Baltagi BH (1995) Econometric analysis of panel data. Wiley, New York
Barker K (2003) Review of housing supply. Interim report. HMSO, London
Bar-Nathan M, Beenstock M, Haitovsky Y (1998) The market for housing in Israel. Reg Sci Urban Econ 29: 21–49
Beenstock M, Felsenstein D (2003) Decomposing the dynamics of regional earnings disparities in Israel. Working paper. Hebrew University of Jerusalem
Beenstock M, Fisher J (1997) Macroeconomic effects of immigrants. Weltwirtschafliches Arch 133: 330–358
Benchetrit G, Czamanski D (2008) Immigration and home ownership: government subsidies and wealth distribution effects in Israel. Housing Theory and Society, pp 1–21
Blundell R, Bond S (1998) Initial conditions and moment restrictions in dynamic panel-data models. J Econom 87: 115–143
Bourassa S, Cantoni E, Hoesli M (2007) Spatial dependence, housing submarkets, and house price prediction. J Real Estate Finance Econ 35: 143–160
Bruno G (2005) Estimation and inference in dynamic unbalanced panel data models with a small number of individuals. Stata J 5: 473–500
Bun M, Kiviet J (2006) The effects of dynamic feedbacks on LS and MM estimator accuracy in panel data models. J Econom 132: 409–444
Davidson R, MacKinnon JG (1993) Estimation and inference in econometrics. Oxford University Press, Oxford
Deri D (2000) Agenda setting and problem definition. Policy Stud 21: 37–47
DiPasquale D, Wheaton W (1994) Housing market dynamics and the future of housing prices. J Urban Econ 35: 1–27
Engelhardt G, Poterba J (1991) House prices and demographic change: Canadian evidence. Reg Sci Urban Econ 21: 539–546
Harter M (2004) Drawing inferences about housing supply elasticity form house price responses to income shocks. J Urban Econ 55: 316–337
Hazam S, Felsenstein D (2007) Terror, fear and behavior in the Jeruzalem housing market. Urban Stud 44: 2529–2546
Holland AS (1991) The baby boom and the housing market: another look at the evidence. Reg Sci Urban Econ 21: 565–571
Hort K (1998) The determinants of urban house price fluctuations in Sweden 1968–1994. J Housing Econ 7: 93–120
Hwang M, Quigley J (2006) Economic fundamentals in local housing markets: evidence from U.S. metropolitan regions. J Reg Sci 46: 425–453
Jaffee D, Rosen K (1979) Mortgage credit availability and residential construction. Brookings Papers Econ Activity 1979: 333–386
Judson R, Owen A (1999) Estimating dynamic panel data models: a guide for macroeconomists. Econ Lett 65: 9–15
Kiviet J (1995) On bias, inconsistency, and efficiency of various estimators in dynamic panel data models. J Econom 68: 53–78
LeSage J, Pace R (2009) Introduction to spatial econometrics. Chapman & Hall, London
Lipschitz G (1997) Immigrants from the former Soviet Union in the Israeli housing market: spatial aspects of supply and demand. Urban Stud 34: 471–488
Malpezzi S (1999) A simple error correction model of house prices. J Housing Econ 8: 27–62
Mankiw N, Weil D (1989) The baby boom, the baby bust, and the housing market. Reg Sci Urban Econ 19: 235–258
Mayer C, Sommerville CT (2000) Land use regulation and new construction. Reg Sci Urban Econ 30: 639–652
Meen G (2001) Modelling spatial housing markets: theory, analysis and policy. Kluwer, Dordrecht
Meen G (2005) On the Economics of the Barker Review of housing supply. Housing Stud 20: 949–971
Muellbauer J, Murphy A (1997) Booms and busts in UK housing market. Econ J 107: 1701–1727
Ohtake F, Shintani M (1996) The effect of demographics on the Japanese housing market. Reg Sci Urban Econ 26: 189–201
Ortalo-Magné F, Rady S (1999) Boom in, bust out: young households and the housing price cycle. Eur Econ Rev 43: 755–766
Plaut S, Plaut P (1998) Endogenous identification of multiple housing price centers in a metropolitan area. J Housing Econ 7: 193–217
Portnov B (1998) The effect of housing on migration in Israel: 1989–1994. J Popul Econ 11: 379–394
Schein A (2002) Concern for fair prices in Israel. J Econ Psychol 23: 213–230
Swan C (1995) Demography and the demand for housing: a reinterpretation of the Mankiw-Weil demand variable. Reg Sci Urban Econ 25: 41–58
Van der Vlist AJ, Gorter C, Rietveld P, Nijkamp P (2002) Residential mobility and local housing market differences. Environ Planning A 34: 1147–1164
Acknowledgments
We are grateful for helpful comments from participants in the November 2008 Israeli-Dutch Regional Science Workshop, Jerusalem, the June 2009 European Real Estate Society Conference, Stockholm and the 2009 European Regional Science Association Conference Poland. Maria Marinov provided excellent research assistance.
Open Access
This article is distributed under the terms of the Creative Commons Attribution Noncommercial License which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
About this article
Cite this article
van der Vlist, A.J., Czamanski, D. & Folmer, H. Immigration and urban housing market dynamics: the case of Haifa. Ann Reg Sci 47, 585–598 (2011). https://doi.org/10.1007/s00168-010-0396-2
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s00168-010-0396-2