Impact of Olympics of Property Prices - Example

Impact of Olympics of property prices Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission Abstract As the magnitude of globalization deepens, the competition between major cities in the world has also heightened mostly in regard to the selection process in the hosting of major sporting activities. This is based on the fact that these global events present the host cities with not only an excellent chance for economic advancement but also an ideal platform to stage themselves to the wide global audience (Mckay & Plumb, 2001). The Olympics games have a long history and they have become a center of spectacular display in regard to sports. They play an important role in bringing together athletes from all over the world to participate in these famous events which are held after every five years. Their importance is evidenced by the fact that every athlete works hard to participate in them and when given a chance, this is usually a dream come true. This global sporting event has evolved to become one of the most imperative activity in the sporting calendar since its instigation in Athens in 1896 (Essex & Chalkley, 2003). Perhaps this phenomenon is best epitomized by the 2000 Sydney Olympics which according to Mckay and Plumb (2001), estimates reveal that this were the most watched event in history with around 3.7 billion people of the overall 4 billion world population tuning to watch the events at one point or another during the 16 days of the events. It has also been pointed out that these events often pose great impacts, both positive and negative to the host countries. The analysis in this paper will focus on the effects of the events on property market. It will entail a comparative analysis of before and after the events. Keywords: Olympic Games, Property market/prices Background of the Olympic Games The first Olympic events were held in Athens in 1896 and managed to attract 311 athletes from 13 countries. In the recent past, the Olympics event in Sydney, Australia had a massive involvement, attracting 10, 651 athletes from 199 countries. In the commercial sense, there was a ticket sale of 6.7 million coupled with 3.7 billion viewers from the televisions. This shows the importance and the impact of these games both to the commercial and social world (Essex & Chalkley, 2003). The following graph shows the number of viewers in various Olympic events. Figure 1.0: Number of viewers in the past three Olympic Games Source: Don, C., 2010 Despite the fact that there were no profits that were earned from hosting the Olympics before 1984, Cashman (2002) pointed out that these events in the present times leave massive impacts on the host cities with this impactful trend elevating since 1984. These games have evolved to attract increased athletes, games categories and intensified sponsors and media presence, which continue to heighten the expectations on hosting the events. Mckay and Plumb (2001) noted that despite the fact that the short-term effect of the Olympic games on the host countries are associated with the generation of revenues and jobs, the most robust impacts are associated with the longer-term changes in the host cities which take diverse forms. These includes but not limited to impacts on urban regeneration, creation of Olympic villages, growth of conventional business and tourism and enhancement of the infrastructure among other impacts. However, the primary focus on this paper is the impact of these games on the property markets. Some of the researches conducted in this realm have pointed to the fact that the regeneration of the areas that are mandated with the responsibility of hosting this major event may result in the redevelopment or refurbishment of the neighborhoods (Hiller, 1998). One of the researches in this regard was conducted by McKay and Plumb (2001) who pointed out that from 1986 to 1993, the values for residential property are estimated to have elevated by 250-300 percent. This reveals the magnitude of these events on the property market. Nonetheless, the focus of this paper will be limited in scope in that it will primarily center on most recent Olympic events since Sydney 2000 although references may be made to more notable Olympics events in the advanced past aimed at gaining a comprehensive insight into the actual impact of these events on the property market both before and after the events. Li and Brown (1980) noted that the price of property can be perceived as a function of diverse physical features. Various locality and neighborhood features, for instance the proximity to schools, transport services, industrial establishments, parks, levels of pollution, noise and regional crime have a substantial natural impact on prices. Kavetsos (2009) determined that there have been rare investigations into the impact of sports stadium on the property prices whereby until recently, most of the literature was limited in focus, concentrating primarily on the impacts of parks and golf courses and parks on the property market (e.g. Crompton 2000, 2005). The following analysis will focus on diverse impacts dimensions of the Olympic Games on the property prices through a correlation of various variables. Sporting facilities and price market It is apparent that construction of the sporting facilities poses massive impacts on the property prices which can mostly be attributed to the desire of diverse members of the population in the host cities to move closer to these facilities pushing up the price of property in their proximity (McKay & Plumb, 2001) This is best epitomized by the Sydney 2000 Olympic Games whereby this event elevated the development of industries such as transportation, tourism and services. It has been pointed out that prior to the games, the chief beneficiaries of these events were the construction stakeholders based on the background that much of the investment was directed towards the construction of the sporting facilities. Moreover, there was investment into the tourism and services sector whereby massive expansions were being experienced due to the high demand of the Olympic events by a great deal of visitors (McKay & Plumb, 2001). In this regard, it has been pointed out that the prices of real property in Sydney from 1993-1999 grew at a constant rate. This can be attributed to the heightened demand for property like land for constructing both the stadiums and the recreational facilities like resorts, restaurants and shopping malls. This culminated in extensive competition for the scarce resources prompting the prices to explode in this city. However, the periods after these events saw a gradual decline of the property prices whereby the price of real property experienced gradual shrinking after the 2000 Sydney Olympics Games which has come to be commonly referred to as the ‘Bubble of Real property’ (Giesecke & Madden, 2007). However, other scholars have perceived increase of house prices after the announcement, but there were no significant changes one year to the event and in the post-event period as shown in the next figure. Figure 1.1: Effects of hosting Olympics on house prices Source: Somerville, T & Wetzel, J, 2010. Similar effects were experienced during the Athens 2004 Olympics whereby before the events, there was limited dynamics in the property market and the prices for various properties maintained a constant growth parallel to the evident standards of living. However, Potsiou and Zentelis (2005) noted that this sporting event was characterized by massive construction of new luxurious, modern and high-tech sporting facilities, the facilitation of enhanced security, the refurbishment of the existing sporting facilities and increased construction of the Olympic villages in line with the existent cultural realities of the city. Against this background, diverse literature focusing on these events point to the fact that the city experienced exploding property prices, most notably in relation to the construction of the stadiums and other sporting facilities. Most people desired to move closer to the aforementioned facilities in order to have a share of the socio-economic benefits that are associated with hosting these popular events (Kavetsos, 2009). This was parallel with the predictions by McKay and Plumb (2001) that in regards to the direct real estate implications, the prices of property are highly dependent on the maturity of the local market whereby the impacts appear to be higher on less mature property markets. In this regard, these authors projected that the games in Athens would result in more advanced implications on the city’s real estate market more than those that had previously been held in Atlanta and Sydney. Similar trends are expected to prevail during the East London 2012 Olympics. Initial cost estimates had pointed to the fact that approximately 2.375 billion pounds were required to host the events with major stakeholders like the National lottery, , the London Council Tax payers and London Development agency (LDA) contributing significant amounts towards these endeavors (Economic & Social Research Council, 2010). The events are projected to promote a major property market boom with diverse individuals and collectives scrambling to take advantage of the socio-economic benefits directly associated with the events. In this regard, the property market is expected to experience major dynamics with the stakeholders increasing and other investors increasing their investment into real estate prompting the elevation of the property prices. It is yet to be seen whether these prices will decline or maintain a constant trend after the events (Kavetsos, 2009). Infrastructural developments and the price market In this section, the infrastructural developments are divorced from the development of the sporting activities and rather more concentrated on the linked infrastructure like transport networks, communication hubs, schools, parks and health facilities. In a generic sense, the development of these facilities is usually perceived to heighten the prices of property near these facilities as parts of the populations scramble to secure property adjacent to these facilities which is associated with increased convenience, efficiency and reputation boost (Crompton, 2005). Perhaps the most detrimental impacts on the property prices associated with the instigation of the Olympic Games in the host localities were evident during the 2004 Olympic Games. This is whereby mass eviction was experienced in the city to pave way for the infrastructural development (Centre of Housing Rights and Evictions, 2007). According to Potsiou and Zentelis (2005), the Athens Olympic Games were characterized by expensive development of additional infrastructure in addition to the new sporting facilities. These includes but not limited to airport, public transportation, sanitation systems, landscaping and telecommunication which are prerequisite to the effective operation of the Olympic Games and the elevation of the overall national prestige of the hosting country. The increased demand of the property near these infrastructures was key in heightening the property prices in the respective countries. McKay and Plumb (2001) noted that the chief long-term impact of hosting the Olympics is the opportunity it provides to influence the pattern of urban development through infrastructural development and environmental enhancement. Against this background, the property prices before the Athens Olympics near infrastructures like airports, roads and telecommunication hubs were relatively constant prior to the Athens winning the bid to host the Olympic Games. Nonetheless, with the property market experienced a major shift after the events due to the benefits that were associated with the newly established and refurbished infrastructure. The extensive cases of eviction in Athens after winning the bid to host the event evidence the impacts of the Olympic Games on the infrastructural development (Centre of Housing Rights and Evictions, 2007). The effects extensive eviction of people to pave way for the infrastructural expansion also spilled over to the prices of property in alternative areas of residence that the evictees resulted to. This is based on the fact that heightening demand for these alternative residential properties resulted to their heightened prices which instigated immense dynamism in the price market (Centre of Housing Rights and Evictions, 2007). Similarly, Sydney Olympics provided a major boost of the property prices on the areas adjacent to where major infrastructures were developed. However, this event did not provide much impact on the residential market when juxtaposed with Seoul and Barcelona which experienced heightened housing prices and rentals in their respective Olympic years (McKay & Plumb, 2001). It has been pointed out that that Sydney will continue to experience infrastructural development and therefore constant property prices which are related to the level of infrastructural development. This is mostly associated with the elevated level of tourism associated with the post-Olympics period. McKay and Plumb (2001) noted that Sydney will continue to enjoy considerable benefits from the Olympics. This is exemplified by the fact that arrivals into Australia where Sydney is the primary destination elevated by 11% during 2000 to 4.9 million and the Sydney airport documented a historical figure of 9.9 million passenger movement during 2000, an elevation of 7.5% from the preceding year. Increased Foreign Direct Investment (FDI) The announcement of successful bid by any city is bound to elevate the level of investment in any particular city. Of a greater concern, this is bound to elevate the level of FDI in these particular issue which poses great impact on the property prices, mostly in relation to land for development. According to Locate in Kent (2009), there are diverse evidence pointing to the fact that Olympic Games elevate the level of FDI, with evidence from Barcelona, Atlanta and Sydney. This is epitomized by the Economic & Social Research Council (2010) which determined that since 2005, London has experienced elevated cross-border investments both from the public corporations and private property investors. In this regard, the property market have experienced enormous changes mostly related to the heightening demand for property from these groups who seek to exploit the viable economic benefits that are projected to sprout both during and after the event. This process was also replicable in Athens and Sydney whereby multi-national corporations (MNCs) as well as private developer scrambled for the most strategic locations to establishment their activities and they subsequently reaped diverse benefits from these extensive undertakings. When juxtaposed with the periods before the event in the respective cities, the level of FDI had experienced gradual and constant increase and thus constant property prices in areas where the events were to be held. Nonetheless, the announcement of their successful bid to host this popular activity heightened the interest from diverse investors from foreign countries creating a sharp elevation of the property prices (Locate in Kent, 2009). This trend is bound to continue even after the events as most corporations and individual investors project continued benefits from the economic boom in the post-Olympic epoch, which is usually associated with what has come to be commonly referred to as the ‘Olympic legacy’. This can be perceived in terms of increased tourism, exposure and increased consumption by the locals of products that were initially perceived to be foreign etc. (Locate in Kent, 2009). This is also bound to increase the level of joint ventures between the foreign corporations and the local companies aimed at exploiting common interests (Brunet, 2005). For instance, it is projected that the successful London Olympics will result in heightened level of joint venture between the local companies and new entrants from the international scale. Consequently, this is also bound to pose long-term effects on the property prices as more and more business venture seek to strategically establish themselves, attain and maintain competitive advantage and also attain a favorable niche in the local market (Economic & Social Research Council, 2010). Therefore, this competition among investing MNC and individual investors in the post-Olympic era has been pointed out as posing major impacts on the property market which is usually expected to maintain a constant trend prior and during the events and experiencing gradual elevation after the events Conclusion From the above discourse, it is apparent that the hosting of Olympic events in any city poses diverse impacts on the property markets both prior, during and after the events. The most predominant impact is the increase in the prices of diverse property ranging from development land, residential houses, business premises near the developed infrastructure and any other property that is located near the refurbished infrastructures like transport systems, schools, parks and telecommunication centers among others. The continued increase of the price for these properties prior, during and after the events vary from one city to another with majority of the cities experiencing constant heightened increase before, during and after the events. Nonetheless, there are others whereby this increased reaches the peak before and during the event but proceed to experience gradual decline after the Olympics event. References Brunet, F., 2005, An economic analysis of the Barcelona’92 Olympic Games: resources, financing and impact, Universitat Autònoma de Barcelona, Barcelona. Cashman, R., 2002, Impact of the Games on Olympic host cities. Available from: . (09 May, 2012). 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