Does urban tourism development impact urban housing prices?

Cong, Shufeng and Chin, Lee and Abdul Samad, Abdul Rahim (2023): Does urban tourism development impact urban housing prices? Published in: International Journal of Housing Markets and Analysis , Vol. 18, No. 1 (2025): pp. 5-24.

Abstract

The purpose of this study was to investigate the relationship between tourism development and urban housing prices in Chinese cities. Specifically, the study aimed to explore whether there is a relationship between the two variables in tourist and non-tourist cities and whether there is a non-linear relationship between them. In this study, the entropy method was used to construct the China City Tourism Development Index, which provides a more comprehensive measure of the level of tourism development in different cities. In total, 45 major cities in China were studied using the panel data approach for the period of 2011 to 2019. The empirical analysis conducted for this study found that tourism development affects urban house prices and that there is an inverted U-shaped relationship. However, this varies across cities, with house prices in tourist cities tending to be more influenced by tourism development than non-tourist cities. Also, foreign direct investment, population size, fixed asset investment and disposable income per capita were found to have an impact on house prices in both tourism and non-tourism cities.There are significant differences in tourism development and urban house prices in different cities in China. This study considers these differences when examining the impact of tourism on house prices in 45 major cities in China by dividing the sample cities into tourist and non-tourist cities.

• Item Type: MPRA Paper
• Language: English
• Keywords: housing prices; tourism; tourism cities; non-tourism cities; fixed effect; China
• Subjects: R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R21 - Housing Demand

References

Ahmed, R. and Jawaid, S.T. (2023), "Foreign capital inflow and housing prices in a developing country: an advanced econometric enquiry", International Journal of Housing Markets and Analysis, Vol. 16 No. 1, pp. 146-166.

Alola, A.A,. Asongu, S.A,. and Alola, U.V. (2020),“House prices and tourism development in Cyprus: A contemporary perspective", Journal of Public Affairs, Vol.20.

Andria, J. Tollo, G. and Pesenti, R. (2021),“Fuzzy multi-criteria decision-making: An entropy-based approach to assess tourism sustainability", Tourism Economics, Vol.27No. 1,pp. 168–186.

Anguera-Torrell, O. Vives-Perez, J. and Aznar-Alarcón, J.P. (2021),“Urban tourism performance index over the COVID-19 pandemic", International Journal of Tourism Cities, Vol.7No. 3,pp. 622-639.

Arbel, Y. Fialkoff, C. and Kerner, A. (2017),“Negative Externalities and Implicit Non-Linear Prices: Capitalization of Highway Noise into Housing Values", Journal of Real Estate Literature, Vol.25No. 2,pp. 335-364.

Azam Khan, M. Ali, N. Khan, H. and Yien, L.C. (2022),“Factors determining housing prices: empirical evidence from a developing country’s Pakistan", International Journal of Housing Markets and Analysis. Vol. ahead-of-print No. ahead-of-print.

Azam, M, and Khan, S. (2022),“Threshold effects in the relationship between inflation and economic growth: Further empirical evidence from the developed and developing world", International Journal of Finance & Economics. Vol.27,pp. 4224-4243.

Azam, M.,Mahdiat M.,Hafeez M. and Bakhtyar B. (2022),“Investigating the Role of Tourism in Economic Growth: Empirical Evidence from Pakistan", Polish Journal of Sport and Tourism, Vol.29 No.1, pp. 39-47. https://doi.org/10.2478/pjst-2022-0007

Azam, M. and Rashid, S. (2015),“The monetarist hypothesis of inflation in Pakistan - a critique", Journal of the Asia Pacific Economy, Vol.20 No.4, 559-576.

Baloch, Q. B., Shah, S. N., Iqbal, N., Sheeraz, M., Asadullah, M., Mahar, S., and Khan, A. U. (2023),“Impact of tourism development upon environmental sustainability: a suggested framework for sustainable ecotourism", Environmental science and pollution research international, Vol.30No.3, pp.5917-5930.

Biagi, B., Brandano, M. G., and Caudill, S. B. (2016),“Tourism and house prices in Italy: A latent class approach", Tourism Economics, Vol.22No.5, pp.964-978.

Biagi, B. Brandano, M.G. and Lambiri, D. (2015),“Does Tourism Affect House Prices?", Growth Change, Vol.46,pp. 501-528.

Brotman, B.A. (2021), "Portland ordinances: tiny home and short-term rental permits", International Journal of Housing Markets and Analysis, Vol. 14 No. 1, pp. 124-136. https://doi.org/10.1108/IJHMA-02-2020-0012

Brotman, B.A. (2020), "San Francisco: rental restrictions and pre-restriction host listing motivation", Journal of Property Investment & Finance, Vol. 38 No. 2, pp. 147-155. https://doi.org/10.1108/JPIF-09-2019-0128

Chen, F. (2018),“Spatial Differentiation of Urban Housing Prices in Guangdong Province and Its Influencing Factors", Modern Economy, Vol.9, pp. 664-681.

Chen, K. Lin, H. Liao, L. Lu, Y. Chen, Y.J. Lin, Z. Teng, L. Weng, A. and Fu, T. (2022),“Nonlinear Rail Accessibility and Road Spatial Pattern Effects on House Prices", Sustainability, Vol.14No. 8, 4700.

Cheng, M.Y. Liu, Y.S. and Zhou, Y. (2019),“Measuring the symbiotic development of rural housing and industry: A case study of Fuping County in the Taihang Mountains in China", Land Use Policy. Vol.82, pp.307-316,

Chin, L. and Li, X. (2021),“House prices and bank credit in China: analysis of first- and second-tier cities", International Journal of Housing Markets and Analysis, Vol.14No. 4,pp. 779-795.

Ding, Y. (2019),“Housing prices and population dynamics in urban China", Pacific Economic Review, Vol.24,pp. 27– 45.

Ding, Y., Lee, C. and Lu, M. (2022a),“Does market sentiment push up China’s housing prices? An empirical study based on the data of 45 mainstream cities in China", Journal of Housing and the Built Environment.

Ding, Y., Lee, C. Lu, M. and Deng, P.D. (2022b),“Do high housing prices crowd out young professionals?—Micro-evidence from China", Economic Research-Ekonomska Istraživanja.

Ding, Y., Chin, L., Li, F., & Deng, P. (2022c),“How Does Government Efficiency Affect Health Outcomes? The Empirical Evidence from 156 Countries", International Journal of Environmental Research and Public Health, Vol.19No.15.

Feng, R.K. and Han, R.B. (2021),“Study on the Spatial Differentiation Pattern of Housing Prices in Chengdu-Chongqing City Cluster", Open Access Library Journal, Vol.8,pp. 1-11.

Gan, L. Ren, H. Xiang, W. Wu, K. and Cai, W. (2021),“Nonlinear Influence of Public Services on Urban Housing Prices: A Case Study of China", Land, Vol.10No. 10,1007.

Gan, M., and Ouyang, Y. (2022),“Study on Tourism Consumer Behavior Characteristics Based on Big Data Analysis", Frontiers in psychology, Vol.13.

Gholipour Fereidouni, H. (2012), "The role of real estate agents on housing prices and rents: the Iranian experience", International Journal of Housing Markets and Analysis, Vol. 5 No. 2, pp. 134-144. https://doi.org/10.1108/17538271211225896

Jin, T.H. Cheng, L. Liu, Z.C. Cao, J. Huang, H.S. and Witlox, F. (2022),“Nonlinear public transit accessibility effects on housing prices: Heterogeneity across price segments", Transport Policy, Vol.117,pp. 48-59.

Kavarnou, D. and Nanda, A. (2018),“How does tourism penetration affect house prices? Evidence from Crete, Greece", Journal of Tourism Analysis: an interdisciplinary journal, Vol.23No. 3,pp. 289-301.

Kim, J.H. and Lee, S.Y. (2022),“Foreign direct investment and housing prices: evidence from South Korea", International Economic Journal, Vol.3No. 2,pp. 247-262.

Kok, S.H., Ismail, N.W., and Chin, L. (2018),“The Sources of House Price Changes in Malaysia", International Journal of Housing Markets and Analysis, Vol.11No. 2,pp. 335-355.

Li, J. and Chiang, Y. (2012),“What pushes up China's real estate price?", International Journal of Housing Markets and Analysis, Vol.5No. 2,pp. 161-176.

Li, S.Y.M., Suardi, S. and Wee, B.J.M. (2022),“Bank lending behavior and housing market booms: The Australian evidence", International Review of Economics & Finance, Vol.81,pp. 184-204.

Li, Z. Razali, M.N., Gholipour Fereidouni, H. and Mohd Adnan, Y. (2018),“Macro-economic index effect on house prices in China", International Journal of Housing Markets and Analysis, Vol.11No. 3,pp. 453-475.

Lin, H. and Liu, Y. (2021),“A Research on the Influence of Tourism Development on Urban Real Estate Price−A Case Study of Xiamen City. MICE Prospects, Vo1.2 No.1, pp.80-89.(In Chinsese)

Lin, Y. Ma, Z. Zhao, K. Hu, W. and Wei, J. (2018),“The Impact of Population Migration on Urban Housing Prices: Evidence from China’s Major Cities", Sustainability, Vol.10No. 9.

Liu, K.B., Wang, Y.C., and Lin, L. (2020),“Will Tourism Development Increase Housing Prices?——Based on the Empirical Analysis of Hainan Province, China", International Journal of Frontiers in Sociology, Vol.2No. 3.

Liu, R. Yu, C. Liu, C. Jiang, J. and Xu, J. (2018),“Impacts of Haze on Housing Prices: An Empirical Analysis Based on Data from Chengdu (China)", International Journal of Environmental Research and Public Health, Vol.15No. 6.

Mahmoodi, E., Azari, M., and Dastorani, M. T. (2023). Comparison of different objective weighting methods in a multi-criteria model for watershed prioritization for flood risk assessment using morphometric analysis. Journal of Flood Risk Management, Vol. 16 No. 2, e12894. https://doi.org/10.1111/jfr3.12894

Maisel, S.J. (1949), “Variables commonly ignored in housing demand analysis”, Land Economics, Vol. 25 No. 3, pp. 260-274.

Manzoor, F. Wei, L. Asif, M. Haq, M.Z., and Rehman, H. (2019),“The Contribution of Sustainable Tourism toEconomic Growth and Employment in Pakistan", International journal of environmental research and public health, Vol.16No. 19.

Mathur, S. (2022),“Non-linear and weakly monotonic relationship between school quality and house prices", Land Use Policy, Vol.113.

Mikulić, J. Vizek, M. Stojčić, N. Payne, J.S., Časni, C.A., and Barbić, T. (2021),“The effect of tourism activity on housing affordability", Annals of Tourism Research, Vol.90.

Miles, D. (2012),“Population Density, House Prices and Mortgage Design", Scottish Journal of Political Economy , Vol.59,pp. 444-466.

Mussa, A. Nwaogu, U.G. and Pozo, S. (2017),“Immigration and housing: A spatial econometric analysis", Journal of Housing Economics, Vol.35,pp. 13-25,

Naseem, S. (2021),“The Role of Tourism in Economic Growth: Empirical Evidence from Saudi Arabia", Economies, Vol.9No. 3.

Nguyen, Q.H. (2021),“Impact of Investment in Tourism Infrastructure Development on Attracting International Visitors: A Nonlinear Panel ARDL Approach Using Vietnam’s Data", Economies, Vol.9No. 3.

Ni, P.F. Zhang, Y.Z. and Cao, Q.F. (2019),'The Influence of Housing Prices on Urban Competitiveness: Review and Prospects'.Chinese Journal of Urban and Environmental Studies, Vol.7 No.3

Özmen, M.U., Kalafatcılar, M.K., and Yılmaz, E. (2019),“The impact of income distribution on house prices", Central Bank Review, Vol.19No. 2,pp. 45-58.

Paramati, S.R., and Roca, E. (2019),“Does tourism drive house prices in the OECD economies? Evidence from augmented mean group estimator", Tourism Management, Vol.74,pp. 392-395.

Pilatin, A., Hepşen, A. and Kayran, O. (2023), "The effect of social capital on housing prices: panel data analysis by province in Turkey", International Journal of Housing Markets and Analysis, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJHMA-11-2022-0170

Qu, W., Li, J., Song, W., Li, X., Zhao, Y., Dong, H., Wang, Y., Zhao, Q., and Qi, Y. (2022), " Entropy-Weight-Method-Based Integrated Models for Short-Term Intersection Traffic Flow Prediction", Entropy (Basel, Switzerland), Vol. 24 No. 7, 849. https://doi.org/10.3390/e24070849

Radulescu, C.Z., Radulescu, M., and Boncea, R. (2022), " A Multi-Criteria Decision Support and Application to the Evaluation of the Fourth Wave of COVID-19 Pandemic. Entropy, Vol. 24 No.5, 642. https://doi.org/10.3390/e24050642

Rasool, H. Maqbool, S. and Tarique, M. (2021),“The relationship between tourism and economic growth among BRICS countries: a panel cointegration analysis", Future Business Journal, Vol.7No. 1.

Schäfer, P. and Braun, N. (2016), "Misuse through short-term rentals on the Berlin housing market", International Journal of Housing Markets and Analysis, Vol. 9 No. 2, pp. 287-311. https://doi.org/10.1108/IJHMA-05-2015-0023

Shokoohyar, S., Sobhani, A. and Sobhani, A. (2020), "Determinants of rental strategy: short-term vs long-term rental strategy", International Journal of Contemporary Hospitality Management, Vol. 32 No. 12, pp. 3873-3894. https://doi.org/10.1108/IJCHM-03-2020-0185

Stevenson, S. (2008), “Modeling housing market fundamentals: empirical evidence of extreme market conditions”, Real Estate Economics, Vol. 36 No. 1, pp. 1-29.

Tam, P.S., Lei, CK., and Zhai, T. (2022),“Investigating the bidirectionality of the relationship between residents’ perceptions of tourism impacts and subjective well being on support for tourism development", Journal of Sustainable Tourism.

Tan, C.T., Lee, C.Y., Tan, Y.T., and Keh, C.G. (2018),“A nonlinear ARDL analysis on the relation between housing price and interest rate: The case of Malaysia", Journal of Islamic, Social, Economics and Development, Vol.3No. 14, pp. 109-121.

Tang, H. Cai, C. and Xu, C. (2022),“Does the Digital Economy Improve Urban Tourism Development? An Examination of the Chinese Case", Sustainability, Vol.14No. 23.

Teixeira, S.J., Ferreira, J.J., Wanke, P. and Antunes, J.J.M. (2021),“Evaluation model of competitive and innovative tourism practices based on information entropy and alternative criteria weight", Tourism Economics, Vol.27 No. 1,pp. 23-44.

Wang, S. Wang, J. and Wang, Y. (2018),“ Effect of land prices on the spatial differentiation of housing prices: Evidence from cross-county analyses in China", Journal of Geographical Sciences, Vol.28, pp. 725-740.

Wang, W.K., and Tsai, I..C. (2022),“House age and housing prices: a viewpoint of the optimal time for land redevelopment", International Journal of Strategic Property Management, Vol.26No. 3, pp. 172-187.

Wen, T.P. (2021),“The Impact of Foreign Direct Investment on China's Housing Prices", Advances in Economics, Business and Management Research, Vol.178.

Wilhelmsson, M., Ismail, M. and Warsame, A. (2022), "Gentrification effects on housing prices in neighbouring areas", International Journal of Housing Markets and Analysis, Vol. 15 No. 4, pp. 910-929. https://doi.org/10.1108/IJHMA-04-2021-0049

Wittowsky, D., Hoekveld, J., Welsch, J., and Steier, M. (2020),“Residential housing prices: impact of housing characteristics, accessibility and neighbouring apartments – a case study of Dortmund, Germany. Urban, Planning and Transport Research, Vol. 8No.1, pp. 44-70.

Wong, V.K., and Aralas, S.B. (2019),“Macroeconomic variables and housing prices in Malaysia", Proceedings of the International Conference on Economics, pp. 23-34.

Wong, W.L., Chin, L. and Koong, S.S. (2019),“Housing Prices in Peninsular Malaysia: Supported by Income, Foreign Inflow or Speculation? ", International Journal of Housing Markets and Analysis, Vol.12No. 2,pp. 424-441.

Wong, W.L., Law, S.H., Said, R. and Chin, L. (2015),“Consumption and Housing Wealth: A Malaysian Case that Demonstrates a Negative Relationship", International Journal of Economics and Management, Vol.9No. S,pp. 163-180.

Wu, T.P., Wu, H.C., Wang, C.M., and Wu, Y.Y. (2021),“Causality between tourism and housing prices: a wavelet-based approach", Journal of Policy Research in Tourism, Leisure and Events.

Xu, Y. Zhang, Q. Zheng, S. and Zhu, G.Z. (2018),“House Age, Price and Rent: Implications from Land-Structure Decomposition", The Journal of Real Estate Finance and Economics, Vol.56,pp. 303-324.

Yang, L. Khaskheli, A. Raza, S.A., and Shah, N. (2023),“Panel smooth transition regression approach to analyzing tourism development - housing price nexus in G7 countries", International Journal of Housing Markets and Analysis, Vol.16No. 1,pp. 218-231.

Yıldırım, M.O., and Karul, C. (2022),“Does tourism affect house prices in Turkey? Evidence from smooth structural break tests", International Journal of Housing Markets and Analysis, Vol.15No. 5,pp. 1033-1052.

Yiu, C.Y., and Cheung, K.S. (2022),“The Age-Period-Cohort Problem in Hedonic House Prices Models", Econometrics, Vol.10No. 4.

Zaman, K. Shahbaz, M. Loganathan, N. and Raza, S.A. (2016),“Tourism development, energy consumption and Environmental Kuznets Curve: Trivariate analysis in the panel of developed and developing countries", Tourism Management, Vol.54,pp. 275-283.

Zhang, X., Lin, Z. and Maeng, J. (2022), "Investigating the impact of home-sharing on the traditional rental market", Internet Research, Vol. 32 No. 7, pp. 169-184.

Zheng, Y. (2017),“The Impact of Population Age Structure on Real Estates Price—Evidence from China Provincial Panel Data", Open Journal of Social Sciences, Vol.5,pp. 212-222.

Zhou, Q. Shao, Q.L. Zhang, X.L. Chen, J. (2020),“Do housing prices promote total factor productivity? Evidence from spatial panel data models in explaining the mediating role of population density", Land Use Policy,Vol.91.

Zou, G. and Chau, K. (2015),“Determinants and Sustainability of House Prices: The Case of Shanghai, China", Sustainability, Vol.7No. 4,pp. 4524-4548.