Tourism activity affects house price dynamics? Evidence for countries dependent on tourism

Cró, Susana; Martins, António Miguel; Martins, António

http://hdl.handle.net/10400.13/7243

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Authors

Cró, Susana

Martins, António Miguel

Martins, António

Abstract(s)

This study analyses the impact of tourism in house prices in eight tourism dependent countries in terms of exports for the period from 2000 to 2018. We employ a Vector-Error Correction Model (VECM) for the empirical estimation given that house prices, tourism activity and other determinants are cointegrated. The results indicate that tourism has a significant positive impact on house prices both in the short-run and in the long-run. The Granger causality tests show that tourism activity Granger-causes house prices in the eight countries analysed. These results have important practical and political implications. There is a delicate environment and social equilibrium in tourist destinations that it is necessary to ensure. If it is true that tourism has positive effects on the economy through job creation and economic growth it is also important to internalize the negative externalities caused by tourism, through the adoption of appropriate economic instruments and policies.