Do urban tourism hotspots affect Berlin housing rents?

• Pages: 231-255
• Date: 03 April 2017
• Published date: 03 April 2017
• DOI: https://doi.org/10.1108/IJHMA-05-2016-0031
• Author: Philipp Schäfer,Jens Hirsch
• Subject Matter: Property management & built environment,Real estate & property,Housing markets

Do urban tourism hotspots affect

Berlin housing rents?

Philipp Schäfer and Jens Hirsch

IREBS, University of Regensburg, Regensburg, Germany

Abstract

Purpose –This study aims to analyze whether urban tourism affects Berlin housing rents. Urban tourism is

of considerable economic importance for many urban destinations and has developed very strongly over the

past few years. The prevailing view is that urban tourism triggers side-effects, which affect the urban housing

markets through a lack of supply and increasing rents. Berlin represents Germany’s largest rental market and

is particularly affected by growing urban tourism and increasing rents.

Design/methodology/approach –The paper considers whether urban tourism hotspots affect Berlin’s

housing rents, using two hedonic regression approaches, namely, conventional ordinary least squares (OLS)

and generalized additive models (GAM). The regression models incorporate housing characteristics as well as

several distance-based measures. The research considers tourist attractions, restaurants, hotels and holiday

ats as constituents of tourism hotspots and is based on a spatial analysis using geographic information

systems (GIS).

Findings –The results can be regarded as a preliminary indication that rents are, indeed, affected by urban

tourism. Rents seem to be positively correlated with the touristic attractiveness of a particular location, even

if it is very difcult to accurately measure the real quantity of the respective effects of the urban tourism

amenities, as the various models show. GAM outperforms the results of OLS and seems to be more appropriate

for spatial analysis of rents across a city.

Originality/value –To the best of the authors’ knowledge, the paper provides the rst empirical analysis

of the effects of urban tourism hotspots on the Berlin housing market.

Keywords GAM, Spatial analysis, Berlin, Hedonic approach, Housing rents, Tourism hotspots

Paper type Research paper

Introduction

Berlin has the largest residential rental market in Germany with a ratio of about 85 per cent

rental housing to owner-occupied and has long had a reputation as a cheap place to live. But

recently, soaring rents have threatened that image. Responsible for this development are,

rst and foremost, the continuously rising housing demand due to high net inward migration

rates (40,000 more inhabitants p.a.) and the limited and comparatively inelastic housing

supply (Investitionsbank Berlin, 2013;Berlin Hyp, 2015). Rents have increased particularly

in the attractive inner-city districts, but also in the outskirts where demand was

comparatively low before. Building permissions as well as building completions have clearly

increased, and there is condence that newly constructed ats will ease the situation. In

addition, many measures, such as rent control or the misuse prohibition law, have been

introduced to restrict the tightness of the Berlin housing market. However, a signicant

easing of the housing market can only be achieved if the additional demand can be satised

(Investitionsbank Berlin, 2013).

In addition to high inward migration and a limited housing supply as the main rent

boosters, urban tourism is held liable for exacerbating the tight situation on the Berlin

housing market. After reunication, tourism developed rapidly, and today, Berlin is a major

tourism destination and one of the three most important players in European urban tourism,

beside Paris and London. Arrivals and overnight stays reached 12.4 million (⫹4.2 per cent

The current issue and full text archive of this journal is available on Emerald Insight at:

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Berlin housing

rents

231

Received 4 May 2016

Revised 1 September 2016

Accepted 13 September 2016

InternationalJournal of Housing

Marketsand Analysis

Vol.10 No. 2, 2017

pp.231-255

©Emerald Publishing Limited

1753-8270

DOI 10.1108/IJHMA-05-2016-0031

year-over-year) and 30.3 million (⫹5.4 per cent year-over-year), respectively, in 2015. Thus,

the number of overnight stays grew by 21.1 million, more than tripling within 16 years

(Statistical Ofce Berlin Brandenburg, 2016). There were about 240,500 tourism-related jobs,

and urban tourism generated €10.65bn gross revenues, meaning a contribution of 7 per cent

to aggregate income, and €1.91bn in taxes for the Federal Government and States in 2014

(VisitBerlin, 2014). That urban tourism has become a truly important economic factor for

several cities worldwide is beyond dispute (World Tourism Organization, 2012), whereas the

fact that externalities of tourism add value to housing markets has been conrmed only in a

few studies (Biagi and Faggian, 2004;Biagi et al., 2015). In Berlin, many residents are

complaining about the massive inbound tourism ows. The local media are full of articles

about housing scarcity, displacement and particularly increasing rents due to tourism. In

addition, locals are complaining about crowded, rubbish-strewn and noisy neighborhoods.

The focus of attention is that besides conventional overnight tourism, a further unrecorded

number of tourists stay in private short-term rentals and, thus, worsen the already-tense

situation on the housing market, as numerous residential ats are illegitimately misused as

short-term holiday ats. Politicians – among others – argue that these short-term rentals

additionally stress the housing market. Especially, the situation in the inner-city housing

districts is tense, where, in addition, nearly the entire tourism-infrastructure and a large part

of the amenities are located (Schäfer and Braun, 2016;Füller and Michel, 2014).

The aim of this study is to contribute to the existing literature by providing an approach

to quantify the impact of urban tourism on the housing market, by measuring the spatial

effect of tourism hotspots on housing rents and, thus, contributing to the current debate on

“touristication” in Berlin. To the best of the authors’ knowledge, there have been no studies

in the literature, to date, investigating whether urban tourism hotspots affect housing rents.

Therefore, the following two research questions were analyzed:

RQ1. Do urban tourism hotspots affect the housing rents of the surrounding rental ats?

RQ2. Do different types of urban tourism hotspots cause different effects?

Research considers tourist attractions,restaurants,hotels and holiday ats as constituents of

tourism hotspots and is based on a spatial analysis using geographic information systems

(GIS). The analysis applies a generalized additive model (GAM) by benchmarking it with

conventional ordinary least squares (OLS) to analyze the respective effects on housing rent.

The paper is structured as follows: the second section reviews the existing and related

literature. The third section describes the data for the study, and the fourth section provides

the methodology used, giving a description of the spatial analysis and the hedonic price

models. The fth section describes and explains the results of the empirical analysis, and the

nal section summarizes and concludes the study.

Literature review

Studies on tourism and housing markets are relatively sparse, particularly concerning urban

destinations. There is no study measuring the effect of a bundle of urban tourism amenities

on the housing rents, while simultaneously considering the attractiveness of each amenity.

However, previous research conrms that tourism can certainly affect housing prices. The

study by Biagi and Faggian (2004) develops two tourism indices and measures, with an

ordinary hedonic pricing model, its effects on Sardinian housing prices at municipality level

and nds a correlation between house prices and tourism, concluding that the more touristic

a place, the higher the competitive pressure on the housing market. A further study by Biagi

et al. (2015) conrms that tourism activity affects house prices positively in 103 Italian cities.

Most other previous studies analyze the effect of single, predominantly recreational or leisure

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