Is the Housing Market of the most Tourism Penetrated places affected by Tourism Penetration? Ð The case study of Crete Island

This study tries to identify whether the most tourism penetrated places are the ones which have the greatest influence in terms of house prices because of tourism. In Chapter 1 we briefly presented the economic, political and real estate framework of the country and particularly this of the islands. In chapter 2, we tested standard hedonic model for the housing markets of the islands which revealed some unique drivers. One of the basic driver, is this of tourism appearing constantly significant across particular islands; so natural question out of that is to look deeper into tourism penetration. By taking Crete Island as a case study, from 2006 to 2012, we firstly structure tourism indicators for each prefecture. Then, by using the principal component analysis, we create the Tourism Penetration Index (TPI) of each prefecture and we rank the four prefectures of Crete from the most tourism penetrated to the least one. The second stage of the analysis we regress the data of the four individual prefectures in three steps: firsly, we regress properties without the TPI effect; secondly, we use the Tourism Penetration Index (TPI) of the first stage corresponding the prefecture and the year to each observation, so as to observe its significance to the house prices of each prefecture. To the last step of the second stage of the analysis, we add to the hedonic models the TPI of the neighbour prefecture(s), so as to identify whether there is any the spill-over effect cause by tourism penetration. The focus here is to identify whether a) the TPIj of a prefecture j is significant on House Prices of the prefecture, b) its significance on House Prices of each prefecture follows the same ranking as in first stage and therefore, whether the most Tourism Penetrated places are the ones whose houses prices have been mostly affected by tourism penetration, c) House Prices are affected by the TPI of the neighbour prefecture (tourism spill-over effect). Models are tested for robustness across several specifications.