Immigration and Urban Housing Market Dymamics: The Case of Haifa

1. Immigration and Urban Housing Market Dymamics: The Case of Haifa Arno van der Vlist University of Groningen Henk Folmer University of Groningen Danny Czamanski Technion

2. Demographic Shock and Changes in the Housing Market in Haifa • Large influx of immigrants into Haifa • How did the housing market absorb the demographic shock?

3. Figure 1 Annual population growth (left) and annual house price change (right) for Haifa 1985-2000

4. Demographic Shocks and the Housing Market • Are the demographic shocks absorbed through higher prices , through supply changes, or through both? • Does the housing market return to the same equilibrium price level as prior to the shock?

5. Othake and Shintani (1996) • Demography and housing stock are co-integrated: Error Correction Model • Long term adjustment through the housing stock • Demographic effect on house prices through short run adjustment

6. Objective of paper • Are immigration and house prices co-integrated? • Does housing demand by immigrants make house prices peak? • How do real price dynamics evolve? • Do price dynamics vary accross submarkets? • Do submarket prices converge or diverge?

7. Programs to accomodate immigrants • Rent assistence program to renters • Government mortgage program to owners • Legislative amendments in landuse planning procedures • Supply programs

8. Data • Housing transactions in haifa between January 89 and June 99 • Data set includes information on -date of transaction -mortgage type -transaction price -size of the apartment -address

9. Region • Transaction data combined with submarket characteristicssocioeconomic characteristics • 4 submarkets • -low • -medium low • -medium high • -high

10. Table 1 Transactions by submarket Table 1 Transactions by submarket

11. Figure 2 Annual change in NISM2 (left) and index (center) and NISm2 (right) by submarket

12. Table 2 Summary statistics Table 2 Summary statistics

13. Empirical Model

14. Tests • Panel unit root tets: rejection of the null of a unit root in NISM2, IMM and BUILD: all series are stationary with the same mean-reversion parameter • Co-integration test: 2 out of 4 statistics to reject the null of no co-integration

15. Empirical Results-pooled Table 3 LSDVC dynamic regression (bootstrapped SE), pooled

16. Empirical Results-lower submarkets Table 4 LSDVC dynamic regression estimates(bootstrapped SE), submarket 1 and 2

17. Empirical Results-higher submarkets Table 5 LSDVC dynamic regression estimates(bootstrapped SE), submarket 3 and 4

18. Findings (I) • Coefficient of the lagged dependent variable suggest stability • Correction of approximately 30% (pooled and submarkets 1-2) and 17% (submarkets 3-4) • Coefficient of IMM positive and significant for the pooled model and for submarkets 3-4 and positive but not significant for submarket 1-2

19. Findings (II) • Othake and Shintani: demographic shocks have a significant effect on price through the short-run adjustment process, but no effect in the long run suggesting that housing supply is elastic • In our model BUILD negative but insignificant • BUILD relates to Israel at large!! • Mortgages right sign but insignificant