Immigration and house prices under various labour market structures in England and Wales

This article estimates the impact of immigration on local house prices under various local labour market structures in England and Wales. Typically, for the nation as a whole, newly arriving immigrants add to the overall housing demand; this would in general push up house prices when facing an upward-sloping supply curve. However, sorting and native-outmigration response to immigration may change the dynamics and impact at the ‘local’ level, depressing house prices through income change. We use data on England and Wales to investigate the local house price effect of immigration when taking into account the local labour market structure of the areas, particularly with respect to employment density and average socioeconomic profile (skill) of workers. We found that in high density of employment areas but with a majority of the occupations in low skill sets, there is a negative house price effect led by immigrant inflows, and this might be due to a type of tenure ‘downgrade’ in the area as immigrants increase the rate of free renting. Free renters are less likely to participate in the housing market themselves and an increase in the rate of this form of tenure could also reduce their mobility further, hence lead to lower levels of housing stock turnover and transaction-related renovation; as a result, both housing quality and house prices fall. The evidence is in addition to the native flight argument typically found in the literature to explain house price depreciation led by immigration.