Gentrification effects on housing prices in neighbouring areas

Mats Wilhelmsson,Abukar Warsame,Mohammad Ismail

doi:10.1108/ijhma-04-2021-0049

Mats Wilhelmsson, Abukar Warsame + Show 1 more

Open Access

https://doi.org/10.1108/ijhma-04-2021-0049

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Abstract

PurposeThis study aims to measure the occurrence of gentrification and to relate gentrification with housing values.Design/methodology/approachThe authors have used Getis-Ord statistics to identify and quantify gentrification in different residential areas in a case study of Stockholm, Sweden. Gentrification will be measured in two dimensions, namely, income and population. In step two, this measure is included in a traditional hedonic pricing model where the intention is to explain future housing prices.FindingsThe results indicate that the parameter estimate is statistically significant, suggesting that gentrification contributes to higher housing values in gentrified areas and near gentrified neighbourhoods. This latter possible spillover effect of house prices due to gentrification by income and population was similar in both the hedonic price and treatment effect models. According to the hedonic price model, proximity to the gentrified area increases housing value by around 6%–8%. The spillover effect on price distribution seems to be consistent and stable in gentrified areas.Originality/valueA few studies estimate the effect of gentrification on property values. Those studies focussed on analysing the impacts of gentrification in higher rents and increasing house prices within the gentrifying areas, not gentrification on property prices in neighbouring areas. Hence, one of the paper’s contributions is to bridge the gap in previous studies by measuring gentrification’s impact on neighbouring housing prices.

Highlights

Academic literature cites social/cultural factors, economic factors or some combination of both as the primary causes or drivers of gentrification
The results indicate that the parameter estimate is statistically significant, suggesting that gentrification contributes to higher housing values in gentrified areas and near gentrified neighbourhoods
Housing market dynamics and tight housing markets, with short housing supply compared to job growth, are critical in generating gentrification and a contributing factor to increasing house prices in urban areas

Summary

Introduction

Academic literature cites social/cultural factors, economic factors or some combination of both as the primary causes or drivers of gentrification. The key driver of gentrification in the inner-city during the gentrification wave from the late 1970s through the 1980s, is crucial for gentrification (Kennedy and Leonard, 2001). Housing market dynamics and tight housing markets, with short housing supply compared to job growth, are critical in generating gentrification and a contributing factor to increasing house prices in urban areas. The preferences of certain demographic groups for easy access to city amenities create higher demand-side housing pressures (Kennedy and Leonard, 2001). The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode

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