The Housing Market Dynamics of Two Budapest Neighbourhoods

This study deals with residential location modelling of Budapest, Hungary, using a neural network approach known as the self-organising map (SOM). After identifying various urban elements, the analysis focuses on the dynamics of two selected inner-city neighbourhoods: the middle parts of the districts VIII (Józsefváros) and IX (Ferencváros) respectively. These adjacent, but different, areas in the south-eastern part of the inner city have both received attention as subjects for substantial rehabilitation in recent decades. When the differentiation of micro-locations in the targeted areas was modelled using the SOM over a period of six yearly cross-sections, notable dynamics could be identified in terms of both actual changes in the fundamental quality, and expected house price escalations that are not related to fundamentals. In particular, the evidence reveals how housing market development is related to most localised processes of social and physical upgrading occurring in an urban setting. Keywords: Housing market dynamicsBudapestneighbourhoodself-organising map (SOM)area rehabilitationurban regeneration Acknowledgements The author is indebted to Professor Gábor Locsmándi at the Budapest University of Technology and Economics, with whom he had several discussions during 2004 and 2005. Thanks are also due to the Editors and anonymous referees of the journal for giving the opportunity to improve and publish the paper. Notes 1 Here it is assumed that, in order to meet the challenges of the new economy, cities do compete more than before, and that they have distinct strategies for how to offer the necessary incentives for the prospective firms and consumers. 2 While the enquiry presented in the fourth section is from an earlier period, some key figures as well as qualitative and even judgemental-rhetorical commentary of today's situation are presented in the second section (and also in the first sub-section in the fourth section). This was considered necessary because of the fast pace of change in this urban development context. The documents in question comprise the following marketing brochures presented by various urban and property development actors (both private and public led consortiums) at the Real EXPO Munich, 6–8 October 2008: Budapest Facts and Figures 2008; Budapest Business Region; DunaCity Budapest 2008 and RE Source 2008, 29 September. 3 Partially the same analysis could be carried out using cluster analysis because the meaning of the clusters is the same in the two techniques. Prior work suggests that the clustering based on the SOM is similar and sometimes more logical than with K-means clustering method when each outcome is compared with the 'realistic' housing sub-markets in the city under study (Kauko, Citation2002). It should also be noted that the SOM has other properties that make it a partial replacement for projecting and regression techniques too. 4 Although in such rapidly changing circumstances this pole position is about to be overtaken by other neighbourhoods. 5 Recent demolition and the construction of new whole blocks has taken place in this area due to the aforementioned Corvin-Szigony project.