Counter-urbanisation, filtering, and dynamics changes in urban rural housing submarkets

Counter-urbanisation, filtering, and dynamics changes in urban rural housing submarkets Nan Liu Research student in Property University of Aberdeen Business School

Background and motivation • Counter-urbanisation: population flows from urban cores to rural areas, caused by: • The change in residential preferences of working-age people; • The expansion of commuting fields round employment centres; • Improvements in transport and communications technology; • The emergence of scale diseconomies and social problems in large cities; • The growth of employment in particular localised industries (e.g. tourism); • The acceleration of retirement migration; etc. Source: Champion 1988

Background and motivation • Consequences in the housing market: • Locals are believed to have been priced out of the housing market by incomers (Shucksmith, 1981, case study on the Lake District area); • “outsiders” occupy second home and retirement home, competing for residential property, “the price of housing has escalated well beyond the reach of most Padstonians” (Gilligan, 1987, case study on Cornwall); • “Incomers purchase property from all segments of the housing market and therefore have increased the demand for all housing” (Stockdale et al, 2000, analysis of the Scottish rural housing market). • Such research however, overlooks changes in market dynamics in different submarkets (both quality and geography), and its impact on other submarkets; lacks quantitative evidence.

Prime research aim To investigate changes in urban and rural house prices and housing stock by tracking the changes in market dynamics resulting from counter-urbanisation.

Research framework

Traditional filtering models • Determinates: • Cross price elasticities for demand; • Quality & quantity of new constructions. • (Galster & Rothenberg, 1991)

Spatial filtering theoretical analysis • Underlying assumptions • Population only flows from urban areas to rural areas; • Population flows from the urban high quality submarket to the rural high quality housing market; • Deterioration’s effect on dwellings filtering process is embodied in the decision of upgrading and downgrading;

Spatial filtering theoretical analysis

Spatial filtering theoretical analysis • Filtering in the urban areas (medium run) • In UH: quantity decreases, price change ambiguous, dwellings downgrade; • In UM: quantity and price change ambiguous, dwellings downgrade, households filter up; • In UL: quantity change ambiguous, price decreases, lowest quality housing gets demolished, households filter up.

Theoretical analysis • Filtering in the rural areas (constrained constructions) • In RH: quantity increases, house price increases; • In RM: quantity decreases, house price increases, houses filter up; • In RL: quantity decreases, house price increases, houses filter up.

Theoretical analysis • Filtering in the rural submarkets (allowing new construction in all quality markets) • In RH: quantity increases, house price increases; • In RM and RL: both quantity and price changes are ambiguous depending how much contraction takes place; • House still filter up, households filtering is possible if supply functions in RM and RL shift to the right.

Some initial findings on Aberdeen city and Aberdeenshire Location: Northeast Scotland; Urban: oil and gas industry based Experienced counter-urbanisation; House price in some rural areas increased dramatically.

Migration, households, and housing stock in Aberdeen city and Shire The region experienced population flows from the urban to rural areas • Both city and shire gained in number of households; • Surplus housing stock exists in both market; • The city has more surplus stock.

Data and limitation • Aberdeen Solicitors Property centre data (1984-2008) • Information regarding existing housing stock; • House characteristics, price and location; • Repeated sales; • No information on households; • Limited information on new house buildings. • New construction data from the central governments statistics (1986-2008) • Private new house buildings start & completion date; • Location (settlement); • No indication on dwelling type/price; • No information on council/housing association completions

Some findings Repeated sale data categorised into four quality submarkets Second sale compare to the first sale:

Physical change Data shows evidence of physical change 27% of the repeated sales experienced increase in total number of rooms; 11% had total number of rooms reduced; Difficult to conclude whether change in quality submarket is caused by upgrading/downgrading.

New construction • Constructions take place in all submarkets; • More dwellings have been built in the rural areas than in the city; • Evidence shows degrees of constraint on constructions in both urban and rural areas

Conclusion and future research • Theoretical analysis suggests • rural households MIGHT be forced out as a consequence of counter-urbanisation, depending on the construction activity; • low income groups in the urban area will benefit from the phenomenon; • Both quantity and price in all submarkets will change; • Both house and household filtering take place. • Empirical analysis suggests • A certain level of house filtering take place (e.g. house change quality submarket, and physical change do occur); • New construction do take place • Limitations require more comprehensive data (BHPS data) • Policy implication: urban and rural should be considered as a whole

Theoretical analysis • Supply adjustments in the medium run • New constructions takes place when the gap between cost and price is the largest

Theoretical analysis • Supply adjustments in the medium run • conversion (upgrading and downgrading) takes place when there is opportunity to increase…

Counter-urbanisation, filtering, and dynamics changes in urban rural housing submarkets