Synchronisation among short-term rental markets, co-movements and cycles in 39 European cities

Abstract

This paper presents new evidence of the short-term rental market's prices and transactions from a daily time-series perspective in 39 European cities from 2015 to 2020. It uses Airbnb micro datasets to build time-series cycles by extracting the original observations containing total bookings (rent transactions), rental units supply, and asking rent, with a daily periodicity. The cycles show the periods in which short-rental activity was more relevant for each city, and the level of rents across Europe. The paper provides empirical evidence of a long-term relationship among the city variables (tested via mean and variance). Causality supporting co-movements across cities was found by estimating a short-term naïve market equilibrium model using the vector error correction model approach, supporting the hypothesis that the short-term rental market performs according to housing-market principles. Short-run elasticities among rents and contracts across the 39 cities show causal evidence of co-movements among rents and the supply and demand of properties. The market adjustment on the supply side estimates new units responding to changes in prices within 15 lags (days) and longer (350 lags) from the demand side, equivalent to eight to nine months. Evidence of the pandemic's limited effect on housing supply and prices' positive effect is also provided. A robust negative weekend impact on prices was found, suggesting stronger market relevance on weekdays.