The impact of immigration on local housing market for England and Wales

The focus of this research, carried out by doctoral student Cathy Zhu, is on the impact of immigration on local housing market for England and Wales. In particular, the effect on local level house prices is examined through various econometric techniques which are commonly used to infer causality. To help gauge immigration as a positive or negative force on house prices, the theoretical explanation given in the literature is usually through the demand and supply of housing. On one hand, the incoming immigrants contribute to the total population and hence add to the overall housing demand, shifting the demand curve outwards, generating an increase in house prices; on the other hand, segregation and residential sorting due to native preferences of relocating close to the same ethnic group may lead to substantial native out-migration response towards increasing immigration in an area. Other causal channels which lead to the negative effects on house prices include that immigration led structural decline in housing quality, a substantial supply response, damage in the neighbourhood stability of the area and so on.

The analysis of the first chapter explores additional dimensions of this immigration effect on house prices, firstly by examining separate effects of immigrants by country groups, and secondly by looking at the role of employment accessibility plays on the house price effect of immigration. The positive effects tend to be led by country groups from Antarctica and Oceania, the Rest of Asia with majority coming from the Far East and the South East Asia, the EU15, the A8 and the North America. The negative effects tend to come from the rest of Europe and the rest of America and Africa. Additionally, negative house price effect is found in low job density area (less employment accessible).

The second chapter conducts similar analysis at a lower spatial scale in an attempt to search for some neighbourhood effect. A small negative effect on house price is also found however, there is no evidence on of native out-mobility at this level of geography but the literature seems to point to a substantial native out-mobility at much larger spatial unit, e.g. at local authority level. Immigration effect on overcrowding is also examined: immigrants tend to overcrowd on average in which London experiences the most overcrowded housing condition, while the South East, East, East Midlands and West Midlands show moderate overcrowding caused by immigration. Also, when looking at this effect across dwelling types and tenure, the author realises it is the flats and leasehold properties that had the most price reduction.

The main technique used so far is an instrumental variable approach within a 2SLS model under a panel data framework. The approach helps infer causal relationship rather than just association as in ordinary least squares regressions.

For more information about this research, contact Cathy Zhu via email  jzhu19@sheffield.ac.uk

Photo credit: ©iStock.com/Greta6

Policy relevance: 
This research will be of interest to policy makers, practitioners and researchers exploring the impact of immigration on housing and local services and will be of use when informing the development of new housing policies.
Researchers: 
Date: 
February, 2017

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