Will air transport or tourism affect urban property prices? The case of regional cities in New Zealand

Tourism is one of the most important economic activities in New Zealand and tourists commonly travel by air, given that New Zealand is an isolated country. This paper explicitly models the inter-relationships among air transport, tourism and property prices in the regional cities of New Zealand. We investigated this inter-relationships by constructing a three-stage least squares (3SLS) structural model using a balanced monthly panel dataset of New Zealand’s six smaller regions/cities from January 2008 to December 2014. Our empirical results showed that tourism activity raised airline seat capacity scheduled at an airport. This indicated that airlines did plan their seat capacity according to tourism activities within a region. However, adjusting the airline seat capacity of an airport alone had no significant effect on the tourism demand of the regions. This implied that tourism does not react to exogenous changes in the supply of air travel in the sample. Interestingly, both airline seat capacity and tourism activity have no significant effect on the property prices of the regions. This may be a unique characteristic of regional cities in New Zealand.