EFFECT OF AIRBNB ON LONDON'S HOUSING MARKET

Abstract

Purpose – This study focuses on Airbnb, a tech-based P2P firm that connects home owners and renters directly in London by offering an alternative form of tourist accommodation. Airbnb has been widely criticised for stripping houses from the property market through commercialisation of homes. Therefore, the housing markets are grappling with a declining supply and fast-rising home prices, which creates an affordability issue amongst Londoners. This paper aims to support this finding empirically. Methodology – Firstly, the spatial and time effects of Airbnb launch were analysed together with the housing stock through a Difference-in-Differences (DD) model. To provide a more accurate estimate of results, a triple difference model (DDD) was also employed to understand how the underlying Airbnb characteristics influence the relationship between Airbnb launch and housing prices. Findings – Evidence shows that the launch of Airbnb leads to an increase in housing prices within 500m zone by approximately 9.5% within the 3-year temporal time window. The positive effects decline as distance to Airbnb increases. This reveals that the positive externality effects of Airbnb triumphs over the negative externality effects. Contribution – To the author’s best knowledge, there is limited empirical research on Airbnb in London. Thus, this paper provides an informative first look at how Airbnb affects the housing market dynamics in London, as well as identifying the behaviours of market participants towards Airbnb. Furthermore, there have been conflicting ideas in the impact of Airbnb on housing market where the growth of Airbnb introduces both positive and negative externalities into neighbourhoods. Hence, this paper could also contribute to existing literatures by finding out whether the effects of Airbnb are more positive than negative in London specifically. Keywords: difference-in-differences, Airbnb, P2P, London, sharing economy, triple difference, housing