Academic journal article Journal of Real Estate Literature

Which Attributes Influence the Housing Markets across the Greek Islands?

Academic journal article Journal of Real Estate Literature

Which Attributes Influence the Housing Markets across the Greek Islands?

Article excerpt

(ProQuest: ... denotes formulae omitted.)

The island region in Greece constitutes a rather special area to examine housing market issues as their economies, cultures, and geographies differ substantially from those of the continental part of the country. In this paper, to our knowledge, we probably provide the first empirical analysis of the drivers of housing markets in the region. Various aspects and attributes are examined such as the economic situation, regulatory framework, taxation system, public amenities, as well as the primary and more importantly the tertiary production sector-the tourism sector-which is the main source of GDP for most islands.

We study six main groups of the Greek Islands according to their geographical location (Exhibit T): (T) the Ionian Islands, (2) the North-East Aegean Islands, (3) the Sporades Islands, (4) the Argo-Saronic Islands, (5) the Cyclades Islands, and (6) the Dodecanese Islands. What makes this particular housing market rather interesting for investigation is the substantial heterogeneity that characterizes properties, settlements, islands, and groups of islands. Moreover, the recent global recession that greatly affected the Greek economy due to its political and socioeconomic vulnerability makes this an opportune time to study the regional housing markets. A better understanding of the housing issues is crucial for effective policy formulation to register sustainable recovery and attract potential investments by fostering economic and property market transparency. The fact that the housing markets of the Greek Islands have never been studied before, along with the peculiarities of the region necessitate formulation of an analytical framework.

To this end, we identify several attributes of these housing markets. These attributes are: (1 ) physical and locational heterogeneity, (2) durability, (3 ) political environment, (4) transaction costs, (5) imperfect and asymmetric information, (6) immovability or spatial fixity, and (7) external or local area effects. By using a unique dataset of housing units across 36 islands in the above mentioned six island groups, we apply the hedonic modeling technique to identify the relative importance of some of the observable attributes.

The rest of the paper is presented as follows: in the next section, we describe the Greek economy briefly. Next, we try to situate our research objectives within the extant literature. Then, the data and summary statistics are presented. In the following section, the empirical framework is discussed along with the results. Finally, some concluding remarks are provided.

SIGNIFICANCE OF GREECE AND THE GREEK ISLANDS

The Greek economy has experienced a huge amount of volatility in last few years. A global financial crisis coupled with significant weaknesses in the regional market has resulted in a state of uncertainty in the Greek economy. Some key facts about the country and economy are presented in Exhibits 2 and 3. The country's population according to the recent 2011 population census was approximately 10.8 million, while the population of the 36 islands included in this dataset is 754,320. Population growth in Greece is slow and almost 61% of the population lives in urban areas.

A very large share (almost 79%) of the Greek GDP is represented by the services sector comprised significantly by the tourism sector (World Bank, December, 2011). The tourism sector remains a key driver for the economies in the islands. Despite wide-spread weakness in the economy, the tourism sector in Greece is still performing comparatively well. However, the broad economy of Greece has been shrinking over the last few years. The country's GDP per capita has continuously declined since 2007. Greece's official unemployment rate is among the highest in Europe at almost 27.5% of the total workforce in 2013. More specifically, the number of officially unemployed reached approximately 1.4 million, which is the highest number over the last decades. …

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