Measuring the impact of immigration on neighbourhood house prices: evidence from England and Wales

With immigration rates on the rise, it is critical for policy makers to understand the impact of immigrant inflows on a range of domains. The paper examines the impact of immigration on local housing values at neighbourhood scale, using a first differenced model with spatial diffusion instrumental variables (IVs). A small but statistically significant negative impact was found for England and Wales (E&W) using census data 2001–2011. The reductions mainly come from flat prices and prices of attached properties. When searching for potential explanations for this phenomenon to happen, native out-migration response towards immigration was tested. Affluent natives may be displaced by inflowing immigrants leading to an overall reduction in area level income hence house price drops (Sá, 2015). Weak evidence was found for native displacement at this lower level of geography. Alternative causal channels include housing supply response towards immigrant inflows. This paper provides some evidence supporting that immigrants indeed induce a small increase in housing stocks.