Immigration and urban housing market dynamics: the case of HaifaReport as inadecuate

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The Annals of Regional Science

, Volume 47, Issue 3, pp 585–598

First Online: 16 June 2010Received: 07 July 2009Accepted: 01 April 2010


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.

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Author: Arno J. van der Vlist - Daniel Czamanski - Henk Folmer


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