Declining Opportunities? Perceptions of Housing Market Risk in Shrinking Cities

Housing in shrinking cities may be evaluated ambiguously: While it is often affordable and available, which encourages real estate investment, it may also be associated with specific financial and personal risks. A central determinant of who invests in housing and where may be perceptions and evaluations of homeownership, particularly in contexts of urban shrinkage. In this article, we investigate the perceptions of housing in shaping homeownership in shrinking cities and how these may transform patterns of real estate investment. Based on semi‐structured interviews in six case cities in the Baltic Sea Region—Alytus and Šiauliai (Lithuania), Salo and Kouvola (Finland), Neubrandenburg and Frankfurt (Oder) (Germany)—this research examines evaluations of the housing market in terms of risk, uncertainty, and opportunity for different actor groups and considers the role of spatial and economic characteristics and institutional settings. The findings illustrate that housing markets in shrinking cities are characterised by substantial heterogeneity, implying that submarkets may be profitable in certain locations and for certain investors. Moreover, property investment decisions of owner‐occupiers and investors may be affected by different types of risk and uncertainty. Experiences of urban decline and its effect on the perceived security of housing may thus reduce the expectation of wealth accumulation via homeownership. These issues hold implications for (spatial) inequalities and illustrate that the relevance of housing policy for shrinking cities goes far beyond providing adequate shelter but rather relates to broader questions of economic welfare and regional disparities.