Does urban tourism development impact urban housing prices?

• Date: 19 June 2023
• Pages: 5-24
• DOI: https://doi.org/10.1108/IJHMA-04-2023-0054
• Published date: 19 June 2023
• Subject Matter: Property management & built environment,Real estate & property,Housing markets
• Author: Shufeng Cong,Lee Chin,Abdul Rahim Abdul Samad

Does urban tourism development

impact urban housing prices?

Shufeng Cong,Lee Chin and Abdul Rahim Abdul Samad

School of Business and Economics, Universiti Putra Malaysia, Serdang, Malaysia

Abstract

Purpose –The purpose of this study is to investigate the relationship between tourism development and

urban housing prices in Chinesecities. Specif‌ically, the study aimed to explore whether thereis a relationship

between the two variables in tourist and non-tourist cities and whether there is a non-linear relationship

between them.

Design/methodology/approach –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 periodof 2011 to 2019.

Findings –The empirical analysis conductedfor 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 tendingto be more inf‌luenced by tourism development than non-tourist cities.

Also, foreigndirect investment, population size, f‌ixed asset investmentand disposable income per capita were

found to have an impacton house prices in both tourism and non-tourism cities.

Originality/value –There are signif‌icant differences in tourismdevelopment and urban house prices in

different cities in China. This study considers these differences when examining the impact of tourism on

house pricesin 45 major citiesin China by dividingthe sample cities into tourist and non-tourist cities.

Keywords Housing prices, Tourism, Tourism cities, Non-tourism cities, Fixed effect, China

Paper type Research paper

1. Introduction

The tourism industry is an important engine of growth in China. In 2019, the tourism

industry in China contributed 6.72% to the GDP and created 516.14 million jobs. In fact,

tourism booms have been showndrive economic growth in cities, boosting job opportunities

and population movement (Naseem, 2021;Rasool et al., 2021;Azam et al.,2022). However,

the inf‌lux of more people into an area can lead to an increase in the prices of goods and

services (Azam and Rashid, 2015;Azam and Khan, 2022) as well as house prices. To

illustrate, Figure 1 shows the number of tourists and housing prices in China from 2000 to

2019 where the number of tourists climbed by 234% between 2008 and 2019, and housing

prices increased by 308% between 2008 and 2019. This demonstrates the potential of the

tourism industry as a factor thatinf‌luences housing prices in China.

As China is a densely populated country withlimited natural resources, the development

of tourism may increase population densityand crowd out the land and resources available

for housing development, which is one of the key factors that determine house prices

(Wittowsky et al.,2020). High land costs, well-located areas and abundant resources will

drive up house prices; as a result, locationswith scarce supply or limited resources may see

JEL classif‌ication –R21, Z32

Funding: This work was supported by Universiti Putra Malaysia under Grant number GPSPE/2022/

6303819.

Urban housing

prices

5

Received14 April 2023

Revised26 May 2023

Accepted31 May 2023

InternationalJournal of Housing

Marketsand Analysis

Vol.18 No. 1, 2025

pp. 5-24

© Emerald Publishing Limited

1753-8270

DOI 10.1108/IJHMA-04-2023-0054

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

https://www.emerald.com/insight/1753-8270.htm

signif‌icant house price increases. Tourism development boosts regional economies, where

some land resources are usedto promote tourism. This means that house prices will rise and

people’s cost of living increases. However, as cities become crowded and the living

experience becomes less enjoyable,people will leave and house prices will fall. Therefore, it

is crucial to study the relationship between tourism and urban house prices. Such research

can assist policy makers, urban planners and investors in making strategic decisions to

achieve the goals of economicprosperity and sustainable social development.

To examine the possible impact of tourismon urban house prices in China, we examined

balanced panel data for 45 major Chinese cities from 2011–2019 using both static and

dynamic estimates. In addition, a series of robustness tests were conducted to ensure the

robustness of the estimation. Unlike in existingliterature, we constructed a comprehensive

measure of tourism development in Chinese cities by constructing a Tourism Development

Index to provide a basis for testing the relationship between tourism and house prices in

Chinese cities. We also divided the full sample into two subsamples of tourist and non-

tourist cities to conduct heterogeneityanalysis.

The remaining sections of this paper are organized as follows: a literature review that

synthesizes existing research on inf‌luencing factors affecting house prices in cities and the

impact of tourism on housing prices; a description of the research methodology, including data

collection and analysis procedures; presentation of results from empirical analysis; and f‌inally,

a concise conclusion summarizingmain f‌indings and potential policy implications of the study.

2. Literature review

2.1 Theoretical literature

Understanding the factors that drive housing demand and housing supply is of paramount

importance in housing studies. For instance, Maisel’s (1949) work delved into the exploration of

variables that shape housing demand, laying a foundation for subsequent research in this

domain.Hence,followingMaisel (1949), this study emphasizes on the demand factor rather

than the supply factor because when the supply curve is elastic, demand becomes the main

determinantofprice.Meanwhile,Stevenson (2008) uses a reverse demand function to explain

house prices. When an area has a booming tourism industry that attracts more tourists and

Figure 1.

Average housing

prices and tourist

numbers in China,

2000–2019

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Housing prices(RMB) Millions of tourists

Source: Data resources: China Statistics Yearbook

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