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

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

Data and limitation Aberdeen Solicitors Property centre data ( )  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 ( )  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…