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Decomposing the Impact of Immigration on House Prices

Author

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  • Rosa Sanchis-Guarner

    (Universitat de Barcelona & IEB)

Abstract

Immigrant inflows affect local house prices by increasing housing demand when housing supply is fixed. In this paper, I show that we can formally decompose total demand changes into changes stemming from an immediate increase in population due to new arrivals (“partial effect”) and additional changes in demand from relocated natives (“induced effect”). I propose a methodology to separately estimate these two effects using Spanish provinces’ data from 2001- 2012. Applying an instrumental variables approach, I find that a 1 p.p. increase in the immigration rate increases average house prices by 3.3% and rents by 1%. Partial demand estimates are 24% smaller than the total estimates, due to immigrants and natives locating in the same provinces. The results show that accounting for the impact of immigration on native location choices is key to understanding net demand adjustments, as partial and total effects can significantly differ depending on native population mobility.

Suggested Citation

  • Rosa Sanchis-Guarner, 2022. "Decomposing the Impact of Immigration on House Prices," Working Papers 2022/10, Institut d'Economia de Barcelona (IEB).
    • Handle: RePEc:ieb:wpaper:doc2022-10
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    Cited by:

    1. Gong, Yifan & Yao, Yuxi, 2022. "Demographic changes and the housing market," Regional Science and Urban Economics, Elsevier, vol. 95(C).
    2. Isil Erol & Umut Unal, 2021. "Local House Price Effects of Internal Migration in Queensland: Australia’s New Interstate Migration Capital," MAGKS Papers on Economics 202124, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    3. Daams, Michiel N. & Proietti, Paola & Veneri, Paolo, 2019. "The effect of asylum seeker reception centers on nearby house prices: Evidence from The Netherlands," Journal of Housing Economics, Elsevier, vol. 46(C).
    4. Cem Özgüzel, 2021. "The Cushioning Effect of Immigrant Mobility," CESifo Working Paper Series 9268, CESifo.
    5. Cem Özgüzel, 2020. "The Cushioning Effect of Immigrant Mobility: Evidence from the Great Recession in Spain," PSE Working Papers halshs-03000365, HAL.
    6. Soosung Hwang & Youngha Cho & Jinho Shin, 2020. "The impact of UK household overconfidence in public information on house prices," Journal of Property Research, Taylor & Francis Journals, vol. 37(4), pages 360-389, October.
    7. Giulia Briselli & Wookun Kim, 2025. "Unintended Consequences of Immigration Reform: Marriage Market, Intra-Household Bargaining, and Well-Being," CESifo Working Paper Series 12222, CESifo.
    8. Bill Cochrane & Jacques Poot, 2019. "The Effects of Immigration on Local Housing Markets," Working Papers in Economics 19/07, University of Waikato.
    9. Michael Amior, 2020. "Immigration, local crowd-out and undercoverage bias," CEP Discussion Papers dp1669, Centre for Economic Performance, LSE.
    10. Anthony Edo & Jacques Melitz, 2024. "The Controversy over European Inflation in 1500–1700: Precious Metals or Population? The English Evidence," Open Economies Review, Springer, vol. 35(3), pages 659-685, July.
    11. Chelghoum, Amirouche & Boumimez, Fayçal & Alsamara, Mouyad, 2025. "Factors influencing asymmetries in Saudi Arabia's housing market," The Journal of Economic Asymmetries, Elsevier, vol. 31(C).
    12. Amaia Palencia-Esteban, 2022. "Immigration, childcare and gender differences in the Spanish labor market," Working Papers 610, ECINEQ, Society for the Study of Economic Inequality.

    More about this item

    Keywords

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    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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