Wednesday, May 18, 2011

Measuring the willingness to pay for houses in a sustainable neighborhood

Abstract: This paper determine the responsiveness of the willingness to pay to changes in structural, locational, and neighborhood attributes of housing that incorporate sustainability objectives. In this study, 299 households from Kuala Lumpur and Selangor in Malaysia were interviewed. Results show that housing developers should build the neighborhood that promotes sustainability as house buyers generally are willing to pay more to live in a sustainable neighborhood. In order to build a progressive low carbon economy, the government should create the vision and give policy directions and guidelines that describe all aspects necessary of a sustainable neighborhood.
The neighborhood variables associated with social sustainability are key factors in the household’s marginal willingness to pay. This study reveals that house buyers are willing to pay 11.05% and 12.73% more to live in the neighborhoods with the presence of local improvement groups and landscaped parks respectively. However, the availability of social interaction places is not statistically significant in this study.

Location and accessibility also play a role in the household’s marginal willingness to pay. There are significant relationships between the property prices and four locational attributes, namely the distance to the workplace, to shops, to the hospital, and to schools. As indicated in Table 2, a house that is situated within 500 m traveling distance from the work place could fetch a 15.50% higher property price. This is quite consistent with the economic theory because a long distance to the work place means incurring more traveling time and cost and that would dampen house prices. According to the survey, it is interesting to note that the house prices located near shops are 31.42% higher. In contrast to the findings of Tse and Love (2000), proximity to retailing outlets does not seem to have any positive impact on the house price as the quality of living would be affected if a house is located near retailing outlets. The response of this survey might be different as house buyers would like to benefit from being able to take a pleasant walk to the shops. As indicated earlier, the main emphasis of the sustainable neighborhood development is walkability. A higher house price (18.08% more) is reported if the house is located less than 500 m away from the hospital. The availability of schools in the neighborhood is an important factor in the household’s marginal willingness to pay, assuming all other variables remain constant. A 29.03% higher sale price is observed for the houses that are less than 500 m away from primary and secondary schools. However, the results show that the distance to sport and recreation centers is insignificantly related to the willingness to pay.

Generally, results are comparable to findings obtained in other studies and indicate similar buyer behaviors in the housing market with reference to locational attributes. Assuming all other thing being equal, house buyers in the survey are willing to pay 25.51% more to live in the gated-guarded neighborhood. It could be due to the security provided by security guards in the gated-guarded environment. Better security measures could instill a sense of trust and peace of mind amongst the residents.

by Teck Hong Tan; Sunway University
Munich Personal RePEc Archive (MPRA)
MPRA Paper No. 30446; posted April 29, 2011
International Journal of Environmental, Cultural, Economic and Social Sustainability (forthcoming)

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