Measuring the neighboring and environmental effects on residential property value: Using spatial weighting matrix

The relationship between house price and location is very complicated. Traditional theory mainly emphasizes the relationship between the effects of accessibility to central locations on housing prices and ignores location-specific attributes of housing. Previous studies at best examine only one or a few environmental amenities. However, little has been done on a high-rise, densely populated living environment. This paper thus aims to investigate the neighboring and environmental characteristics of a residential property on its market value in such unique setting. It uses a more advanced approach-i.e. a hedonic model with spatial adjustments-and applies GIS techniques. The findings are mostly consistent with our hypotheses. The traveling time from the apartment to the central business district is negatively correlated with housing price. Households are also willing to pay more for apartments with sea view and better air. However, greenbelt is not a significant variable on housing price and noise level is even found to be positively correlated with the price. This unexpected finding may be explained by the uniquely dense living environment in Hong Kong where households are willing to sacrifice serenity for convenience. The current research is adequately sophisticated and has contributed to a better understanding of the important theoretical question of how much a household is willing to spend on various environmental and neighbourhood attributes of an apartment. (c) 2006 Elsevier Ltd. All rights reserved.