Skip to main navigation menu Skip to main content Skip to site footer

Externalities and House Prices: A Stated Preferences Approach

DOI:

https://doi.org/10.15678/EBER.2018.060410

Abstract

Objective: In the article, we address the nexus between neighbourhood externalities and house prices using stated preference data. The impact of neighbourhood amenities generating positive externalities and disamenities generating negative externalities on property prices has been studied since the 1970s. Most of the studies to date applied the hedonic methodology and assumed that the effect is homogeneous. The article aims to address the potential heterogeneity of housebuyers’ preferences.

Research Design & Methods: The article uses logistic regression models on stated preference data regarding the sensitivity to three spatial amenities (public transit, urban green area, and retail and services) and three spatial disamenities (railway line, noisy road, petrol station). The dataset comes from six editions of the survey on housing demand and preferences in Krakow conducted annually from 2012 to 2017.

Findings: Empirical results show the relation between household lifecycle and household wealth and willingness-to-pay for spatial amenities and willingness-to-accept spatial disamenities. We did not observe the difference in preferences dependent on the purchase motive.

Implications & Recommendations: The results can be interesting for planners and policymakers, but also in the business environment in case of residential development.

Contribution & Value Added: The article fills the gap in the economic literature on factors affecting housebuyers’ sensitivity to certain positive and negative externalities that manifest in stated willingness-to-pay and willingness-to-accept.

Keywords

externalities, house price, hedonic, stated preferences

PDF

Author Biography

Michał Głuszak

PhD in Economics.

Assistant Professor at the Cracow University of Economics, Faculty of Economics and International Relations, Department of Real Estate and Investment Economics.


References

  1. Adamowicz, W., Swait, J., Boxall, P., Louviere, J., & Williams, M. (1997). Perceptions versus Objec-tive Measures of Environmental Quality in Combined Revealed and Stated Preference Models of Environmental Valuation. Journal of Environmental Economics and Management, 32(1), 65-84. https://doi.org/10.1006/jeem.1996.0957
  2. Agostini, C.A., & Palmucci, G.A. (2008). The anticipated capitalisation effect of a new metro line on housing prices. Fiscal Studies, 29(2), 233-256. https://doi.org/10.1111/j.1475-5890.2008.00074.x
  3. Ahlfeldt, G.M. (2013). If we build it, will they pay? Predicting property price effects of transport innovations. Environment and Planning A, 45(8), 1977-1994. https://doi.org/10.1068/a45429
  4. Ahlfeldt, G.M., & Maennig, W. (2013). External Productivity and Utility Effects of City Airports. Regional Studies, 47(4), 508-529. https://doi.org/10.1080/00343404.2011.581652
  5. Anantsuksomsri, S., & Tontisirin, N. (2015). The Impacts of Mass Transit Improvements on Residential Land Development Values: Evidence from the Bangkok Metropolitan Region. Urban Policy and Research, 33(2), 195-216. https://doi.org/10.1080/08111146.2014.982791
  6. Arrondel, L., & Lefebvre, B. (2001). Consumption and Investment Motives in Housing Wealth
  7. Accumulation: A French Study. Journal of Urban Economics, 50(1), 112-137. https://doi.org/10.1006/juec.2000.2209
  8. Bae, C.-H. C., Jun, M.-J., & Park, H. (2003). The impact of Seoul’s subway Line 5 on residential property values. Transport Policy, 10(2), 85-94.
  9. Beimer, W., & Maennig, W. (2017). Noise effects and real estate prices: A simultaneous analysis of different noise sources. Transportation Research Part D: Transport and Environment, 54, 282-286. https://doi.org/10.1016/j.trd.2017.05.010
  10. Ben-Akiva, M., Mcfadden, D., Train, K., Walker, J., Bhat, C., Bierlaire, M., … & Munizaga, M.A. (2002). Hybrid Choice Models: Progress and Challenges. Marketing Letters, 13(3), 163-175. https://doi.org/10.1023/A:1020254301302
  11. Biao, Z., Gaodi, X., Bin, X., & Canqiang, Z. (2012). The Effects of Public Green Spaces on Residential Property Value in Beijing. Journal of Resources and Ecology, 3(3), 243-252. https://doi.org/10.5814/j.issn.1674-764x.2012.03.007
  12. Brueckner, J.K. (1997). Consumption and Investment Motives and the Portfolio Choices of Home-owners. The Journal of Real Estate Finance and Economics, 15(2), 159-180. https://doi.org/10.1023/A:1007777532293
  13. Chiang, Y.-H., Peng, T.-C., & Chang, C.-O. (2015). The nonlinear effect of convenience stores on residential property prices: A case study of Taipei, Taiwan. Habitat International, 46, 82-90. https://doi.org/10.1016/j.habitatint.2014.10.017
  14. Cohen, E. (2016), The Nature of Israel’s Public Policy Aimed at Curbing the Rise in Property Prices from 2008-2015, as a Derivative of the Country’s Governance Structure. Economics and Soci-ology, 9(2), 73-89. https://doi.org/10.14254/2071-789X.2016/9-2/5
  15. Colwell, P.F., & Dilmore, G. (1999). Who Was First? An Examination of an Early Hedonic Study. Land Economics, 75(4), 620-626. https://doi.org/10.2307/3147070
  16. Conway, D., Li, C.Q., Wolch, J., Kahle, C., & Jerrett, M. (2010). A spatial autocorrelation approach for examining the effects of urban greenspace on residential property values. Journal of Real Estate Finance and Economics, 41(2), 150-169. https://doi.org/10.1007/s11146-008-9159-6
  17. Crompton, J.L. (2001). The impact of parks on property values: A review of the empirical evidence. Journal of Leisure Research, 33(1), 1-31. https://doi.org/10.1080/13606710500348060
  18. Czembrowski, P., & Kronenberg, J. (2016). Hedonic pricing and different urban green space types and sizes: Insights into the discussion on valuing ecosystem services. Landscape and Urban Planning, 146, 11-19. https://doi.org/10.1016/j.landurbplan.2015.10.005
  19. Davino, C., Romano, R., & Næs, T. (2015). The use of quantile regression in consumer studies. Food Quality and Preference, 40, 230-239. https://doi.org/10.1016/j.foodqual.2014.10.003
  20. Debrezion, G., Pels, E., & Rietveld, P. (2011). The Impact of Rail Transport on Real Estate Prices: An Empirical Analysis of the Dutch Housing Market. Urban Studies, 48(5), 997-1015. https://doi.org/10.1177/0042098010371395
  21. de Koning, K., Filatova, T., & Bin, O. (2017). Bridging the Gap Between Revealed and Stated Preferences in Flood-prone Housing Markets. Ecological Economics, 136, 1-13. https://doi.org/10.1016/j.ecolecon.2017.01.022
  22. Dewees, D.N. (1976). The effect of a subway on residential property values in Toronto. Journal of Urban Economics, 3(4), 357-369. https://doi.org/10.1016/0094-1190(76)90035-8
  23. Dube, J., Theriault, M., & Des Rosiers, F. (2013). Commuter rail accessibility and house values: The case of the Montreal South Shore, Canada, 1992-2009. Transportation Research Part A: Policy and Practice, 54, 49-66. https://doi.org/10.1016/j.tra.2013.07.015
  24. Franco, S.F., & Macdonald, J.L. (2016). Measurement and valuation of urban greenness: Remote sensing and hedonic applications to Lisbon, Portugal. Regional Science and Urban Economics. https://doi.org/10.1016/j.regsciurbeco.2017.03.002
  25. Gatzlaff, D., & Smith, M. (1993). The Impact of the Miami Metrorail on the Value of Residences near Station Locations. Land Economics, 69(1), 54-66. https://doi.org/10.2307/3146278
  26. Geng, B., Bao, H., & Liang, Y. (2015). A study of the effect of a high-speed rail station on spatial variations in housing price based on the hedonic model. Habitat International, 49, 333-339. https://doi.org/10.1016/j.habitatint.2015.06.005
  27. Gibbons, S., & Machin, S. (2005). Valuing rail access using transport innovations. Journal of Urban Economics, 57(1), 148-169. https://doi.org/10.1016/j.jue.2004.10.002
  28. Glaeser, E.L., Kolko, J., & Saiz, A. (2001). Consumer city. Journal of Economic Geography, 1(1), 27-50. https://doi.org/10.1093/jeg/1.1.27
  29. Głuszak, M., & Marona, B. (2017). Discrete choice model of residential location in Krakow. Journal of European Real Estate Research. 10(1), 4-16. https://doi.org/10.1108/JERER-01-2016-0006
  30. Gómez-Baggethun, E., & Barton, D.N. (2013). Classifying and valuing ecosystem services for urban planning. Ecological Economics, 86, 235-245. https://doi.org/10.1016/j.ecolecon.2012.08.019
  31. Grislain-Letrémy, C., & Katossky, A. (2014). The impact of hazardous industrial facilities on housing prices: A comparison of parametric and semiparametric hedonic price models. Regional Science and Urban Economics, 49, 93-107. https://doi.org/10.1016/j.regsciurbeco.2014.09.002
  32. Guignet, D., Jenkins, R., Ranson, M., & Walsh, P.J. (2018). Contamination and incomplete informa-tion: Bounding implicit prices using high-profile leaks. Journal of Environmental Economics and Management, 88, 259-282. https://doi.org/10.1016/j.jeem.2017.12.003
  33. Hendon, W.S. (1971). The Park as a Determinant of Property Values. American Journal of Econom-ics and Sociology, 30(3), 289-300. https://doi.org/10.1111/j.1536-7150.1971.tb03232.x
  34. Herath, S., Choumert, J., & Maier, G. (2015). The value of the greenbelt in Vienna: A spatial hedonic analysis. Annals of Regional Science, 54(2), 349-374. https://doi.org/10.1007/s00168-015-0657-1
  35. Hoshino, T., & Kuriyama, K. (2010). Measuring the benefits of neighbourhood park amenities: Application and comparison of spatial hedonic approaches. Environmental and Resource Eco-nomics, 45(3), 429-444. https://doi.org/10.1007/s10640-009-9321-5
  36. Ibeas, T., Cordera, R., Dell’Olio, L., Coppola, P., & Dominguez, A. (2012). Modelling transport and real-estate values interactions in urban systems. Journal of Transport Geography, 24, 370-382. https://doi.org/10.1016/j.jtrangeo.2012.04.012
  37. Irwin, E.G. (2002). The Effects of Open Space on Residential Property Values. Land Economics, 78(4), 465-480. https://doi.org/10.2307/3146847
  38. Jang, M., & Kang, C.-D. (2015). Retail accessibility and proximity effects on housing prices in Seoul, Korea: A retail type and housing submarket approach. Habitat International, 49, 516-528. https://doi.org/10.1016/j.habitatint.2015.07.004
  39. Jim, C.Y., & Chen, W.Y. (2010). External effects of neighbourhood parks and landscape
  40. elements on high-rise residential value. Land Use Policy, 27(2), 662-670. https://doi.org/10.1016/j.landusepol.2009.08.027
  41. Johnson, D.B. (1973). Meade, Bees, and Externalities. The Journal of Law and Economics, 16(1), 35-52.
  42. Kim, K., & Lahr, M.L. (2014). The impact of Hudson-Bergen Light Rail on residential property appreciation. Papers in Regional Science, 93(S1), S79-S97. https://doi.org/10.1111/pirs.12038
  43. Knetsch, J.L. (1964). The Influence of Reservoir Projects on Land Values. Journal of Farm Econom-ics, 46(1), 231. https://doi.org/10.2307/1236486
  44. Kolbe, J., & Wüstemann, H. (2014). Estimating the Value of Urban Green Space: A hedonic Pricing Analysis of the Housing Market in Cologne, Germany. Acta Universitatis Lodziensis Folia Oeconomica, 5(307).
  45. Koster, H.R., & Rouwendal, J. (2012). The impact of mixed land use on residential property values. Journal of Regional Science, 52(5), 733-761. https://doi.org/10.1111/j.1467-9787.2012.00776.x
  46. Kumbhakar, S.C., & Parmeter, C.F. (2010). Estimation of hedonic price functions with incomplete information. Empirical Economics, 39(1), 1-25. http://doi.org/10.1007/s00181-009-0292-8
  47. Lancaster, K.J. (1966). A New Approach to Consumer Theory. Journal of Political Economy, 74(2), 132-157. Retrieved on October 10, 2018 from http://www.jstor.org/stable/1828835
  48. Liou, F.-M., Yang, S.-Y., Chen, B., & Hsieh, W.-P. (2016). The effects of mass rapid transit station on the house prices in Taipei: The hierarchical linear model of individual growth. Pacific Rim Property Research Journal, 22(1), 3-16. https://doi.org/10.1080/14445921.2016.1158938
  49. MacDonald, D.N., Murdoch, J.C., & White, H.L. (1987). Uncertain Hazards, Insurance, and Con-sumer Choice: Evidence from Housing Markets. Land Economics, 63(4), 361-371. https://doi.org/10.2307/3146293
  50. Malpezzi, S. (2002). Hedonic Pricing Models: A Selective and Applied Review. In Housing Economics and Public Policy (pp. 67-89). Blackwell Science Ltd. https://doi.org/10.1002/9780470690680.ch5
  51. Marona, B., & Wilk, A. (2016). Tenant Mix Structure in Shopping Centres: Some Empirical Analyses from Poland. Entrepreneurial Business and Economics Review, 4(2), 51-65. https://doi.org/10.15678/EBER.2016.040205
  52. Martínez, L.M., & Viegas, J.M. (2013). A new approach to modelling distance-decay functions for accessibility assessment in transport studies. Journal of Transport Geography, 26, 87-96. https://doi.org/10.1016/j.jtrangeo.2012.08.018
  53. Mayor, K., Lyons, S., Duffy, D., & Tol, R.S.J. (2012). A hedonic analysis of the value of rail transport in the greater Dublin area. Journal of Transport Economics and Policy, 46(2), 239-261.
  54. McMillen, D.P., & McDonald, J. (2004). Reaction of House Prices to a New Rapid Transit Line: Chicago’s Midway Line, 1983-1999. Real Estate Economics, 32(3), 463-486. https://doi.org/10.1111/j.1080-8620.2004.00099.x
  55. Meade, J.E. (1952). External Economies and Diseconomies in a Competitive Situation. The Eco-nomic Journal, 62(245), 54-67. https://doi.org/10.2307/2227173
  56. Mohammad, S.I., Graham, D.J., & Melo, P.C. (2015). The effect of the Dubai Metro on the value of residential and commercial properties. The Journal of Transport and Land Use, 2(2017), 1-25. https://doi.org/10.5198/jtlu.2017.750
  57. Murphy, J.J., Allen, P.G., Stevens, T.H., & Weatherhead, D. (2005). A Meta-analysis of Hypothetical Bias in Stated Preference Valuation. Environmental and Resource Economics, 30(3), 313-325. https://doi.org/10.1007/s10640-004-3332-z
  58. Nahman, A. (2011). Pricing landfill externalities: Emissions and disamenity costs in Cape Town, South Africa. Waste Management, 31(9-10), 2046-2056. https://doi.org/10.1016/j.wasman.2011.05.015
  59. Phaneuf, D.J., Taylor, L.O., & Braden, J.B. (2013). Combining Revealed and Stated Preference Data to Estimate Preferences for Residential Amenities: A GMM Approach. Land Economics, 89(1), 30-52. https://doi.org/10.3368/le.89.1.30
  60. Pope, J.C. (2008). Buyer information and the hedonic: The impact of a seller disclosure on the implicit price for airport noise. Journal of Urban Economics, 63(2), 498-516. https://doi.org/10.1016/j.jue.2007.03.003
  61. Portnov, B.A., Bella, G., & Barzilay, B. (2009). Investing a timing the Effect of Train Proximity on Apartment Prices: Haifa, Israel as a Case Study. Journal of Real Estate Research, 31(4).
  62. Rodriguez, D.A., & Targa, F. (2004). Value of accessibility to Bogotá’s bus rapid transit system. Transport Reviews, 24(5), 587-610. http://doi.org/10.1080/0144164042000195081
  63. Rosen, S. (1974). Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition. Journal of Political Economy, 82(1), 34-55. Retrieved on October 10, 2018 from http://www.jstor.org/stable/1830899
  64. Shogren, J.F., Shin, S.Y., Hayes, D.J., & Kliebenstein, J.B. (1994). Resolving Differences in Willingness to Pay and Willingness to Accept. The American Economic Review, 84(1), 255-270.
  65. Sirmans, S., Macpherson, D., & Zietz, E. (2005). The Composition of Hedonic Pricing Models. Jour-nal of Real Estate Literature, 13(1), 1-44. https://doi.org/10.5555/reli.13.1.j03673877172w0w2
  66. Song, Y., & Sohn, J. (2007). Valuing spatial accessibility to retailing: A case study of the single family housing market in Hillsboro, Oregon. Journal of Retailing and Consumer Services, 14(4), 279-288. https://doi.org/10.1016/j.jretconser.2006.07.002
  67. Theebe, M.A.J. (2004). Planes, Trains, and Automobiles: The Impact of Traffic Noise
  68. on House Prices. The Journal of Real Estate Finance and Economics, 28(2), 209-234. https://doi.org/10.1023/B:REAL.0000011154.92682.4b
  69. Thorsnes, P. (2002). The Value of a Suburban Forest Preserve: Estimates from Sales of Vacant Residential Building Lots. Land Economics, 78(3), 426-441. https://doi.org/10.2307/3146900
  70. Timmermans, H., Molin, E., & van Noortwijk, L. (1994). Housing choice processes: Stated versus revealed modelling approaches. Netherlands Journal of Housing and the Built Environment, 9(3), 215-227. https://doi.org/10.1007/BF02496997
  71. Trojanek, R., & Głuszak, M. (2018). Spatial and time effect of subway on property prices. Journal of Housing and the Built Environment, 33(2), 359-384. https://doi.org/10.1007/s10901 017- 9569 y
  72. Trojanek, R., Gluszak, M., & Tanas, J. (2018). The effect of urban green spaces on house prices in Warsaw. International Journal of Strategic Property Management, 22(5), 358-371. https://doi.org/10.3846/ijspm.2018.5220
  73. Troy, A., Grove, J.M., & Grove, J.M. (2008). Property values, parks, and crime: a hedonic analysis in Baltimore, MD. MD. Landscape and Urban Planning, 87.
  74. Tyrväinen, L., & Miettinen, A. (2000). Property Prices and Urban Forest Amenities. Journal of Environmental Economics and Management, 39(2), 205-223. https://doi.org/10.1006/jeem.1999.1097
  75. Votsis, A. (2017). Planning for green infrastructure: The spatial effects of parks, forests, and fields on Helsinki’s apartment prices. Ecological Economics, 132, 279-289. https://doi.org/10.1016/j.ecolecon.2016.09.029
  76. Whitehead, J.C., Pattanayak, S.K., Van Houtven, G.L., & Gelso, B.R. (2008). Combining revealed and stated preference data to estimate the nonmarket value of ecological services: an assessment of the state of the science. Journal of Economic Surveys, 22(5), 872-908. https://doi.org/10.1111/j.1467-6419.2008.00552.x
  77. Zhou, X., Gibler, K., & Zahirovic-Herbert, V. (2015). Asymmetric buyer information influence
  78. on price in a homogeneous housing market. Urban Studies, 52(5), 891-905. https://doi.org/10.1177/0042098014529464
  79. Zieba, M., Belniak, S., & Głuszak, M. (2013). Demand for sustainable office space in Poland: the results from a conjoint experiment in Krakow. Property Management, 31(5), 404-419. Retrieved on October 10, 2018 from https://www.emeraldinsight.com/doi/full/10.1108/PM-11-2012-0039?fullSc=1
  80. Źróbek, S., Trojanek, M., Źróbek-Sokolnik, A., & Trojanek, R. (2015). The influence of environmental factors on property buyers’ choice of residential location in Poland. Journal of International Studies, 7(3), 163-173.

Downloads

Download data is not yet available.

Most read articles by the same author(s)