1. : 1 Housing market reactions in presence of retirees migration Paloma Taltavull, University of Alicante, Spain Karen Gibler, Georgia State University, US Presented at European Real Estate Society Meeting. Stockholm, June 24-27, 2009

2. : 2 Introduction Economic changes from 1990s have produced at least three phenomena simultaneously stressing housing demand –Increased employment and wages for Spanish households –Increased worker immigration as the economy enlarged –Increased non-working migrants flows for leisure or residential purposes only

3. : 3

4. : 4 Introduction Large inflow of retiree migrants to Alicante –From 1998 onwards Impact housing market –In some small and medium cities.. Mediterranean coast and islands Stable arrival of >55 years old Britons, Germans and other Europeans citizens +/-3000 per month, +2000 Britons)

5. : 5 Introduction

6. : 6

7. : 7 Impacting especially in some specific housing markets Distinct effect depending on which population group creates the increased demand

8. : 8 Introduction: Previous study of the retiree migrants From REVIcVAL (Taltavull et al, 2008, Gibler et al, 2009) we know:REVIcVAL –Economic features are important: Good house price (perceived in terms of their income) Low cost of maintenance and taxes Premium in relative cost of living Strong purchase capacity of their income Pay cash

9. : 9 Research questions Do these retirees: affect housing prices…..as in the U.S.? increase housing construction.... (Hanushek y Quigley, 1979, Coulson, 1999 Eaton & Eckstein, 1997; Meen & Andrew, 1998.) Hypothesis: 1st…Increase in demand … affect housing prices 2nd… affect construction of ‘specific’ houses

10. : 10 Housing market mechanism Housing prices Houses Supply Demand Time P0P0 P2P2 P1P1 H0H0 H1H1 123456 7891011 12

11. : 11 Housing market mechanism So retiree immigration expected to create unexpected increase in demand Reactions… –1st ….  prices »P =  (pop, y, w, otr, cu) –2nd …  construction »Vivin  p) Empirical contrast –1st.. Isolate the effect of the unexpected demand –2nd…. Identify impact on housing construction

12. : 12 Market fundamentals (1) Where: Qh: housing demand. Xvector with variables having permanent effects on the market, which are: –PopPopulation –Y: Real income per capita or measure of permanent purchase capacity –K:Capital expenditure on housing other than income Z:vector of variables with transitory effects on demand: –phhousing prices –Dhvacancies –Cuuser costs of housing Of: other factors such as relative prices of other goods and tastes

13. : 13 Market fundamentals Pop = Δp + IR + OI y = f(y l, ye) K t = M t + S et 3)P h d t =  1 +  1 [  pop + OI, (y) t, M t ] +  2 [IR, ye, Se] -  5 (  h) t –  6 (Cu) t +  t

14. : 14  p  (y)t, Mt  Market fundamentals  IR, ye, Se] phph p h2 p h3

15. : 15 Empirical analysis (6) Ph t =  1 +  1 [IR] +  2 [ye /yi] t +  3[Exr] t +  4[CPIe/CPIi] t +  5 Hcg t +  6 Irp t –  5 (  h) t +  t Remember that Cu t = f([CPIE/CPIi], Irp, Hcg] t Irp = Mire – Mirl (mortgate rates in Spain and the origin country of retirees) Hcg = Capital gains:  p ht /p ht (-1) -

16. : 16 1st Empirical exercise Database: –Time series 1988....2007 –Quarterly... –Secondary data... Aggregate at province level –British and German flow of retirees (older than 55) –Sources: Spanish National Institute of Statistics (INE), Housing Ministery (M.Vivienda), Bank of Spain, Ministery of Fomento.

17. : 17 Empirical exercise Methodology. Time series.... –Integrated series –NOT cointegrated retirees migrant series –VEC.... And regression methods Stepwise LS and 2SLS

18. : 18 Stepwise regression

19. : 19 Empirical analysis.

20. : 20 Empirical analysis.

21. : 21 Empirical analysis. Cointegration test

22. : 22 Results – VEC

23. : 23 Results – VEC

24. : 24 Long term relationship. Britons

25. : 25 Cholenski impulse-response. Britons

26. : 26 Long term relationship. Germans

27. : 27 Cholenski impulse-response. Germans

28. : 28 Results As expected according to the literature –Housing price atractiveness – relative housing prices between two countries –purchase capacity differentials explain the housing demand, and also the monetary effect through exchange rates –British flow of migration affects housing prices in the long-run with permanent effect –Germans only have short-run temporary effect

29. : 29 Conclusions Retiree migration flows would be expected to create a shock to the housing market in Alicante –Because of the intensity of flow of Britons, not of Germans –AND economic characteristics of the migrants Recent process... Concentrated during late 90s With general impacts on local economy through housing market –Relevant implications... Economy and society

30. : 30 THANKS FOR YOUR ATTENTION