Real estate and regional studies

ABSTRACT

This editorial introduces a virtual special issue of Regional Studies, which surveys some of the key trading zones between regional studies and real estate research. By drawing together real estate-focused research previously published in the journal, the virtual special issue both clarifies the past scope and reflects on the future potential of dialogues between both fields, which to date have broadly come in four different forms: (1) regional variation, change and dynamics through the lens of real estate; (2) how real estate dynamics intersect with other regional processes such as mobility, labour markets and so on; (3) the regionalization transpiring out of real estate dynamics; and (4) advancements to our formative understanding of real estate dynamics.

KEYWORDS:

• real estate
• housing
• urban
• regional

JEL:

• R10
• R30

Regional Studies is a leading international journal covering the development of theories and concepts, empirical analysis and policy debate in the study of regions. Its distinctive purpose is to connect insights across scientific approaches and disciplines in a systematic and grounded way to understand how and why regions evolve. It does so by publishing cutting-edge research that distils how economic and political processes and outcomes are contingent upon regional circumstances. The journal aspires to be a pluralist forum, showcasing diverse perspectives and analytical techniques, with as their main common denominator that contributions have a clear-cut regional sensitivity built into their analytical framework.

In scientific terms, regional studies can best be described as a collective of overlapping communities of practice and communities of experts – it is not a ‘scientific discipline’ with clear-cut boundaries. Crucially, this creates a culture of openness and willingness to engage with other fields of study, which makes regional studies conducive to nurturing what Galison (1997) has called ‘trading zones’. The term ‘trading zone’ hereby refers to the opportunities and challenges associated with scientific exchanges between groups or fields that tend to ascribe different significance to the objects being exchanged. The purpose of this virtual special issue of Regional Studies is to survey some of the key trading zones between regional studies and real estate research. By drawing together real estate-focused research previously published in the journal, the virtual special issue helps to both clarify the past scope and reflect on the future potential of dialogues between both fields, which to date have broadly come in four different forms.

First, there is a body of research that tries to make sense of regional variation, change and dynamics through the lens of real estate. Although the concept of a region may appear elusive, it most commonly refers to a subnational geographical area that is either characterized by a substantial degree of homogeneity (the area is internally more similar than outside areas) or functional integration (the area has more internal interactions than with outside areas). Regions may be explicitly acknowledged in administrative terms, but this need not be the case. Crucially, regions are not per se supposed to have clear, fixed or absolute boundaries: they are open systems with an often-ambiguous territorial layout. Nonetheless, properly delineated regions have the advantage of providing researchers with a useful ‘mid-level’ territorial framework between individual settlements and countries.

This ‘mid-level’ empirical setting has regularly been used in research that uses insights emanating from real estate to enhance our understanding of regional variation, change and dynamics. Deng et al. (2019), for example, analyse how the recent boost in public infrastructure spending has unevenly influenced property values and rents across India. Their study finds evidence of, but also regional variations in, how increases in public infrastructure spending lead to higher property capitalization rates. Funderburg (2019), in turn, estimates the impacts of tax increment financing zones – areas in which a portion of taxes generated are used to invest in infrastructure or fund other economic development projects – on residential development in Polk County, Iowa. He concludes that such zones have indeed contributed to residential development within their borders, while the increase in housing near the zones was not found to be statistically significant. Lerbs and Oberst (2014) employ data at the level of German regions to investigate the geographical variability of homeownership rates. They find that regional differences in the relative price of owning versus renting and the affordability of owner-occupied housing play a key role in explaining why homeownership rates vary so substantially across space. And finally, Valadkhani et al. (2017) add a temporal to the regional dimension by examining seasonality in house and apartment price returns across Australian regions. Their results suggest sizable seasonal effects for the very smallest and very largest regional capitals.

The second trading zone is to some degree comparable with the one pursued in the first set of papers in that it also looks at regional variation through the lens of real estate markets. However, this second type of engagement differs from the first one in that the focus is more broadly on how, at the regional scale, real estate dynamics intersect with other processes such as mobility, labour markets and so on. A clear-cut example of this can be found in different papers published as part of a recent special issue (Regional Studies, 54(4)) extending longstanding research into the relationship between housing and labour markets with an additional focus on mobility. For example, the regional variation of housing prices, which is obviously significantly affected by the broader economic context, may also influence and/or be influenced by decisions about whether to move or stay in various locations and commuting distances (Mohino & Ureña, 2020).

As part of this emerging research agenda, Palomares-Linares and van Ham (2020) analyse differences in inter-provincial migration in Spain from the perspective of homeownership and regional unemployment levels. They find that homeownership is a major and indeed increasing explanatory factor of immobility, and one that is above all clearly articulated in depressed regions. The latter suggests that in such regions people may either become ‘trapped’ in their housing situation or the security of homeownership becomes essential when structural economic conditions are unfavourable. Also in this vein of research, Tammaru et al. (2020) provide new insights into the relationships between income inequality and residential segregation between socioeconomic groups by undertaking a comparative study of European urban regions. They show that changes in the levels of residential segregation between socioeconomic groups coincide with changes in the levels of income inequality found approximately a decade earlier.

The above-mentioned papers by Funderburg (2019) and Lerbs and Oberst (2014) explicitly recognize the (possible) presence spatial interdependence among neighbouring regions. This is a finding in its own right, but it also implicitly points to the importance of the very nature of the regional units used in real estate-focused analyses. This challenge is taken up in a third trading zone, in which papers analyse the regionalization – a process by which certain geographical areas emerge as relevant units of analysis – transpiring out of real estate dynamics. Continuing Evans’ (1990) interest in building a house-price based regional policy, research in this vein does not make a priori assumptions about which regions form meaningful territorial units of analysis. Rather, the emphasis is on exploring how regions and regionality emerge by looking at real estate geographies. Gray (2018), for example, analyses the degree of geographical convergence among British house prices. Using four decades of data, he reveals two contiguous super-regions that nonetheless share some common areas through which house price changes are geographically transmitted from south to north. Meanwhile Tsai (2015) analyses spillovers between different housing markets the UK, testing for ripple effects. An analysis of the direction and magnitude of return spillovers is used to differentiate between the transmission mechanism of information between the regional and the national housing markets over different areas and different time spans. Empirical findings indicate that the difference in housing prices between the northern and southern regions of the UK will increase each time a new financial crisis occurs. In addition, Sigler et al. (2020) investigate the role of tax havens and offshore financial centres (THOFC) in the global economy. Their network analysis of corporate structures in different industry sectors includes the real estate sector, and suggests that it is less anchored in THOFC than such as pharmaceuticals, biotechnology and semiconductors.

The fourth trading zone perhaps most directly speaks to real estate research as a field in that it seeks to advance our formative understanding of real estate dynamics: papers here use a regional lens to explicitly advance our understanding of real estate as such. Zhang and Fan (2019), for example, describe how the level of connectedness between Chinese regional housing markets points to rising levels of systemic risk in the real estate market. This echoes the findings of Stevenson et al. (2014), who, based on analysis of international real estate investment in the office markets of the world’s largest city-regions, find evidence of significant concordance across a large number of these markets. Meanwhile, Bissoondeeal (2020) investigates the interrelationships between house prices and share prices at the regional level in the UK. He finds that both share a negative relationship in the long run and a positive relationship in the short run, albeit with sizable regional variations in the response of house prices to movements in the stock market. In addition, it is found that London prices are influencing prices in other regions, and vice versa. In another contribution, Borgoni et al. (2018) scrutinize the value of cultural amenities to housing markets, considering the combination of aesthetic factors, styles, rhythms and behaviours that make them vibrant and more enjoyable.

We believe that the papers within these four trading zones collectively paint a reasonable picture of the diversity of the ongoing dialogues between regional studies and real estate research. However, this is by no means a comprehensive picture: these engagements are in practice more diverse in that they are, for example, also crosscut by other dimensions. An obvious dimension is the attention being paid to different types of real estate markets. For example, Valadkhani et al.’s (2017) analysis of the seasonality in real estate price returns across Australia suggests that the regional variation in these returns is more significant for houses than for apartments. While to date most real estate-focused Regional Studies papers have dealt with (residential) housing markets, research has also attended to specific housing market niches as well as non-housing real estate.

For example, Sheard (2019) examines the relationship between vacation homes and regional development, a topic that is often particularly germane in the study of peripheral regions with relatively low standards of living. Seasonal residents contribute income to these areas, but they also make local housing costlier and may have negative effects on local housing, labour, and product markets. Applying a model that demonstrates how demand for housing from seasonal residents affects the welfare of local residents, he shows the (positive) effects of a Norwegian policy that obliges homeowners in certain municipalities to reside on their properties.

A different focus of attention has been commercial real estate. Echoing Stevenson et al.’s (2014) analysis of office markets in major global city-regions, Lizieri and Pain (2014) explore the relationships between commercial real estate and regional economic development as a foundation for the analysis of the role of real estate investment in local economic development. They document the diverse connections between economic growth, development, commercial real estate performance and investment allocations, and find that in the UK long-term regional property performance is not the product of long-run economic growth, and is only weakly related to indicators of long-run supply and demand. In addition Ahlfeldt and Maennig (2013) use micro-level data for analysing another specific real estate niche, that of residential and commercial property near city airports. They examine transactions of such real estate in light of (possible) external utility and productivity effects in Berlin, and find strong evidence of adverse noise effects on property prices, thus questioning the justification for locating airports in city centres.

Alongside niche markets such as vacation homes, office markets, and commercial and residential property markets near airports, there has also been research that recognizes the broader forces of (un)making real estate-centred land use across regions. Hortas-Rico and Gómez-Antonio (2020), for example, analyse the extent to which regional dynamics in land supply are the result of strategic interaction among nearby local governments. Focusing on the Spanish empirical setting of limited tax instruments to raise revenues and interjurisdictional competition for mobile residents, they clarify the economic incentives for regional authorities to convert land from rural to urban uses and the concomitant impact on real estate development.

More broadly in the regional studies community, real estate features frequently as a topic of exploration in sister journals to Regional Studies. For example, recent research has explored a range of issues, including inter alia: the links between real estate investment, urban density and capital flows (Pain et al., 2020); regulation, governance and inward investment in real estate (Raco et al., 2020); and land reform (Percoco, 2019).

Collectively, the papers in this virtual special issue clearly demonstrate the value of ongoing exchanges between regional studies and real estate research. Indeed there remains much fruitful ground for further fruitful exchanges: additional analyses of how real estate dynamics may hinder or facilitate regions to mitigate the effects of a recession and/or speed up recovery (Bailey et al., 2020); more grounded research into of the many relations between regional policy and real estate (Evans, 1990); broadening the geographical scope of this often US, UK, and EU-centric research in geographical terms, and subsequently reflecting on its theoretical implications (Roy, 2009); and research into real estate sectors that have hitherto been less studied in regional studies (e.g., public housing) (Lindbergh et al., 2004) are obvious, but by no means the only possibilities that would be welcomed in this journal. In any case, we hope that this virtual special issue allows new links and alliances to be forged between regional studies and real estate research, and we remain open to publishing further research at the intersection of both fields.

The virtual special issue can be accessed at: https://think.taylorandfrancis.com/regional-studies-virtual-special-issue-on-real-estate/.