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Weekly Updates1. INTRODUCTION
The role of location quality in housing consumption is an increasingly important research objective given the demand-side considerations stemming from economic and socio-cultural changes in urban and metropolitan housing market areas. The reason for this growing importance is that we are experiencing a shift from a suppliers market towards buyers market, where diverse branding strategies and lifestyle segmentation are becoming crucial for builders and developers as well as planners and policymakers, in order to know what the housing consumers want in terms of the dwelling and environment characteristics. In circumstances involving diversified demand, the consumption pattern comprises a set of different preference profiles. From an operational point of view, such outcome can be generated through ranking location attributes with respect to their relative importance for the house buyer or renter. This procedure may, for example, be based on pair-wise comparison of attributes based on expert judgements and the analytic hierarchy process (AHP). While not sufficiently robust in itself, this information is suitable to enhance the housing market analysis by confirming and animating the findings obtained by larger scale models based on market data or questionnaire surveys.
In this paper I report findings concerning housing consumption in the inner city of Budapest, Hungary. For this selected supply side segment, one aggregate model and a few disaggregated models (i.e. demand sided segments) of preference profiles were generated based on expert judgements and the AHP The originality of this contribution lies in the application of unconstrained (i.e. ex ante) choice modelling for CEE/post-communist housing circumstances. Here two interlinked issues stand out: one, the quality of locations (with a bottom up definition of the unit of analysis, i.e. neighbourhood or vicinity); and two, the specificity of a local market context that suffers from mismatch between supply and demand. The study has two aims related to these two issues: first, to assess the determinants of intra-urban housing location attractiveness using the AHP tool; and second, to understand the contextual factors behind the resulting assessments. In a broader sense, this research project involves triangulation in order to confirm and to animate the findings obtained from prior housing market analysis of Budapest based on market data (Kauko, 2007), as well as comparison with findings from comparable studies from other housing market circumstances. Section 2 describes some intricacies within the study area that ought to be taken into account when designing the research. Section 3 reviews the literature on expert interviewing and the AHP technique, in order to position the study. Section 4 presents the analysis of descriptive material, interviews and the AHP exercise. Finally, section 5 concludes the study.
2. HOUSING SUBMARKETS AND RESIDENTIAL PATTERNS IN BUDAPEST
It is argued that Eastern European countries are of general interest due to the dramatic changes made from communist-type welfare systems to a free market system (Kovacs, 1997; Kovacs and Szekely, 2004). As a result of the social and economic changes, residential segregation patterns have emerged (Kovacs, 1998). According to Kovacs (1994), in Budapest the basic ecological structure coincides with the physical geographic features: high status areas are traditionally situated near the River Danube and in the hilly Buda side in the west and in the centre of the city, with concentrations of low-income households at the outskirts of the city (see Figure 1). The mean price levels in the prestigious Buda side districts II and XII were already by the early 1990s three and a half times higher than the mean price levels of the working-class areas of Pest (Kovacs, 1994).
While segregation of social groups existed in Budapest and other socialist cities, and that this was also measurable on the spatial level across neighbourhoods, it may be argued that the early 1990s privatization contributed further to the increasing spatial differences (see Kok and Kovacs, 1999). After the year 2000 the Hungarian right-centre coalition government launched a programme for the construction of new public rentals, but its impact was/is negligible in Budapest where the liberals and socialists are in power. To balance the lack of social housing programs a new mortgage system that improved the affordability of homeownership for middle-income starter households (in particular, with respect to the larger dwellings) was launched in the year 2000, but this system lasted only two years-to the next parliamentary elections. On the other hand, piecemeal redevelopment of inner city sites and luxurious housing construction (residential parks) in certain locations for the most affluent buyers has indeed occurred, and it is predicted that middle-class buyers, too, will be targeted for high quality houses or apartments. Continuing the urban renewal further will however be increasingly difficult due to predominantly private homeownership. This impediment to rehabilitation and renewal might however be overcome with a well organised condominium board.
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The prestige of the neighbourhood is another factor that influences market driven urban renewal. Kovacs and Wiessner (2004) noted that the restructuring of the Budapest housing market is a spatial matter: areas are differentiated in terms of price levels and social standing. While Kovacs and Wiessner recognise problems in the inner city and the most monotonous housing estates that need to be addressed by urban policies, they nevertheless offer optimistic prognoses for the city as a whole. A notable new feature is the development of 'residential parks' from 1999 onwards -these are modern, guarded condominium buildings of two to three times higher market price than the average (Kovacs and Wiessner, 2004).
In the 1980s the worst types of housing micro-locations in Budapest were the tenement buildings situated in the inner city along the Grand Boulevard, and just outside it. Two decades later, these types of dwellings and housing environments still remain at the bottom of the market. On the other hand, about one third of the housing stock in Budapest is prefabricated high-rise. There are differences in the prestige of the building types, and these differences coincide with the era in which they were built (see Egedy, 2000, 2001; Kovacs and Douglas, 2004):
* 1950s and early 1960s: the 'Stalin baroque' or 'social realism' style, comprising small blocks of low density; these are traditional buildings adjusted to the urban environment.
* Late 1960s: the first prefab projects, comprising still relatively small, low-rise blocks without elevator or central heating, often surrounded by open space; these were allocated based on merit.
* 1970s: the Soviet-style, high-rise giant estates with 5,000-15,000 flats, lift and central heating, often built in peripheral locations with poor infrastructure; the welfare aspect in their allocation caused stigma and today these are the most problematic estates.
* 1980s: better quality housing estates. According to Bertaud (2006) in general CEE cities have 'European' characteristics: a strong and prestigious inner city, served by functioning public transport system, and today these characteristics are being re-evaluated by the market. At the same time, these cities have typically post-communist characteristics too; because the urban form did not follow prices, today the density gradient is lagging the price gradient, which, given mono-centricity, manifests itself in a derelict industrial zone too close to CBD, a lack of retail and service space in city centers, and residential estates built at the outskirts of town. Therefore, one ought to pay attention to the particular local market context and its path of development, rather than assume that market evidence is completely transportable from Western to more Eastern settings.
The mismatch between available product groups on offer and the aspirations of the consumers is a problem of the inner city housing market in Budapest like in other post-communist cities. Due to historical reasons the inner city housing stock, particularly on the Pest side of the river Danube, suffers from deterioration and monotony. At the same time the increasingly quality conscious and differentiated buyer preferences of the growing middle and higher income groups are not recognised to a sufficient extent.
The following section develops a methodology for market analysis of housing choice in a post-communist/CEE context. This methodology is based on the AHP tool and expert judgements, Despite the mismatch problem noted above the existence of relatively unconstrained market-based preferences for certain neighbourhood qualities is assumed. It is not to say that the same methodology is not suitable for more Western market circumstances, as the conceptual ideas much are building on the extensive literature that theorizes market segmentation, going back to pioneering work by Grigsby (1963) and numerous authors since, who mainly have looked at North American and British cities. In this work it was recognised that the housing market in one and the same urban area is segmented into different, often spatial submarkets, each with a specific mix of dynamic and static features that determine the composition of supply, demand and/ or price. As a consequence, visible or invisible boundaries prevail and emerge between locations that, for one reason or another, are not substitutes for each other (see e.g. Maclennan, 1977; Grigsby et al., 1987; Rothenberg et al., 1991; Whitehead, 1999).
3. THE EXPERT INTERVIEWS AND PREFERENCE MODELLING APPROACHES TO LAND USE AND HOUSING MARKET ANALYSIS
3.1. Modelling stated choice
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