Rapid Evidence Assessment of the Research ... - Rural Housing

Rapid Evidence Assessment of the Research Literature on the Purchase and Use of Second Homes
• 40 per cent of second home sales were in the lower Council Tax bands A to C, and the most popular price
range was £100,000 to £200,000 which directly competes with local residents, and as a result,
• second/holiday homes were “likely to be having a significant impact on restricting access for local
households to the relatively more affordable end of the housing market” (Craigforth Consultancy and
Research, 2007, p71).
89.
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However, once again, the dynamics of this equation were not analysed in detail.
90. Previous research has suggested a link between local house price inflation and growth in the number of
second homes. For example studies in the 1970s and 1980s suggested that competition for houses can be
exacerbated by second home ownership, leading to a bidding up of prices, and that there was a statistical
association between second homes and house prices (Jacobs, 1972; Clark, 1982). However, these early studies
did not take into account the full complexity of local housing markets, and the wide range of possible influences.
91. An unpublished study by Prof. Glen Bramley and colleagues made an attempt to model price impacts at a
local authority level. The econometric model was based on changes in housing market conditions at
neighbourhood scale across England in the period 1988-20051 . The range of variables represented in the
modelling included:
• economic and labour market factors at the regional level
• supply and housing tenure factors at both regional and ward levels
• housing type composition at ward level
• urban form variables relating to density, green space, gardens, etc.
• neighbourhood socio-demographics including poverty measures
• location and access measures
• housing vacancies
• ward and regional level new supply measures
92. In terms of its coverage of the whole of England at ward level and the range of variables included, this
exercise is probably the most comprehensive modelling carried out on neighbourhood housing markets.
93. The model estimated that for a 1 percentage point higher incidence of second homes house prices
would be 1.4 per cent higher, all other things being equal. For example, there were 234,000 second homes in
England in 2005, representing 1 per cent of the total housing stock. The model would estimate that this would
have been sufficient to raise all house prices by 1.4 per cent (or £5,400 on average at 2005 prices) over and
above what they would otherwise have been. In local authorities that had a higher proportion of second homes
than the national average, the impact on prices would be greater. In 2005 a total of 28 of Local Authorities had
house prices raised by more than 5 per cent as a result of a high incidence of second homes.
94. The most straightforward explanation for this impact is that second homes represent an additional
demand for housing and that, given constrained supply, this feeds into higher prices. However, there are other
possible interpretations. In particular, second homes may be a proxy for some unmeasured quality of localities
(e.g. picture postcard scenery, etc.). This quality may make the location attractive to both second home buyers
and also to general homebuyers, who have some locational choice and will pay more to live in an area that is
especially attractive. The model does try to control for area characteristics to some extent but the latter is still a
possible explanation. It should also be noted that the house price data relates to 2005 price levels and
therefore reflects market conditions at that time.