The Impact of Dwelling Quality and Neighbourhood Quality on the Estimation of the Income Elasticity of Demand for Rental Housing in Jeddah,Saudi Arabia

Abstract

This study provides new evidence on the estimation of the income elasticity of demand for rental housing based on individual interviews with 405 households. It looks specifically at the impact of both dwelling and neighbourhood quality aspects on the evaluation of this elasticity. The study finds that the income elasticity of demand for rental housing in Jeddah is 0.519. When the sample is restricted to include Saudi households only, the elasticity estimate is 0.465. These values are within the range of previous empirical estimates. The results also indicate that for a range of various quality measures, the income elasticity is estimated to be less than unity. But, our suggested quality aspects were found to exert sizeable differences on the magnitude of this elasticity for the full sample (from 0.351 to 0.802) as well as for the Saudi sample (from 0.382 to 0.603). Stratified income elasticity estimates for Saudis were also found to be generally less than those for the whole sample.