Steven C. BOURASSA () (School of Urban and Public Affairs, University of Louisville) Martin HOESLI () (HEC-University of Geneva, FAME, and University of Aberdeen (School of Business)) Jian SUN () (School of Urban and Public Affairs, University of Louisville)
Abstract
This paper explores the prices of three aesthetic externalities (the presence of a water view, the appearance of nearby improvements, and the quality of landscaping in the neighborhood) in residential property markets. In particular, we focus on how the implicit prices of such characteristics change with the residential real estate cycle. Given that the supply of these attributes is limited, one would expect their implicit prices to vary with the real estate cycle, contrary to what would be expected for the prices of property characteristics that are in relatively elastic supply. We also examine how the price premium for a water view varies across cities with the supply of such views. The empirical analyses are performed using hedonic models and a rich database of all residential sales transactions from 1986 to 1996 for the three largest urban areas in New Zealand—Auckland, Christchurch, and Wellington. Our results suggest that implicit prices of the aesthetic externalities move with the real estate cycle. We find also that the percentage premiums for water views are greatest in Christchurch, which has the smallest percentage of properties with water views, and lowest in Wellington, which has the highest percentage of properties with views. A good understanding of the impact of these variables is important for the valuation of residential properties.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by International Center for Financial Asset Management and Engineering in its series FAME Research Paper Series with number
rp98.