Tuesday, March 25, 2014

Estimation of the global impacts of aviation-related noise using an income-based approach

• We conduct a meta-analysis of 63 hedonic pricing noise studies and develop an income-based model to assess aviation noise impacts.
• We derive a relationship between city-level personal income and the willingness to pay for one decibel of noise reduction.
• The income-based model can be used to perform cost-benefit analysis of aviation noise policies on a global scale.
• The capitalized monetary impacts of aviation noise in 2005 are estimated to be $23.8 billion around 181 airports worldwide.

Current practices for assessing the monetary impacts of aviation noise typically use hedonic pricing methods that estimate noise-induced property value depreciation. However, this approach requires detailed knowledge of local housing markets, which is not readily available at a fine resolution for most airport regions around the world. This paper proposes a new noise monetization method based on city-level personal income, which is often more widely available. Underlying the approach is a meta-analysis of 63 hedonic pricing studies from eight countries, conducted between 1970 and 2010, which is used to derive a general relationship between average city-level personal income and the Willingness to Pay for noise abatement. Applying the new model to income, noise, and population data for 181 airports worldwide, the global capitalized monetary impacts of commercial aviation noise in 2005 are estimated to be $23.8 billion, with a Net Present Value of $36.5 billion between 2005 and 2035 when a 3.5% discount rate is applied. Comparison with previous results based on real estate data yields a difference of −34.2% worldwide and −9.8% for the 95 US airports in the analysis. The main advantages of the income-based model are fewer data limitations and the relative ease of implementation compared to the hedonic pricing methods, making it suitable for assessing the monetary impacts of aviation noise reduction policies on a global scale.
by Qinxian He 1,  Christoph Wollersheim 2, Maryalice Locke 3 and Ian Waitz 1
Transport Policy via Elsevier Science Direct www.ScienceDirect.com
Available online 21 March 2014; In Press, Corrected Proof
Keywords: Aircraft noise; Hedonic pricing; Willingness to pay; Aviation noise impacts; Cost-benefit analysis

Saturday, March 22, 2014

The effect of ISO14001 certification in property management on property price

Purpose - As environmental awareness has become increasingly pronounced among various stakeholders such as governments and communities, many businesses start to adopt a more environmental-friendly approach in their operations. Even a service-oriented industry such as property management is no exception. One way to showcase a company’s commitment to this cause is to become ISO14001-certified, under which it is required to implement an environmental management system (EMS). In light of this, this paper aims to investigate the impact of this certification in property management, along with two other well-known management certifications/awards in ISO9001 and HKMAQA, on property price.

Findings - The results show that 1) a flat managed by a company with ISO9001 certification is 8.87% higher than another flat managed by a non-ISO9001-certified PMC; 2) the adoption of ISO14001 certification appears to help generate a premium of about 3.65% in property price for a PMC which has already been ISO9001-certified; and 3) for a company already with both ISO9001/14001 certifications, the obtaining of HKMAQA brings about an extra 15.37% in housing price. It can be said that the impact of ISO14001 certification on property value is smaller than that of the other two management standards.
Reprovisioning of Diamond Hill Crematorium - Green Building Award 2010 - Merit Award (New Buildings Category - Hong Kong Institutional / Community Project)
Design/methodology/approach - The hedonic price model was used to determine whether or not there is a relationship between ISO14001 certification (as well as ISO9001 and HKMAQA) and property price, and if so, its impact. Three districts from different parts of Hong Kong, including seventeen private residential developments, were covered in this research.
Research limitations/implications - The findings do not necessary suggest that the adoption of ISO14001 (or HKMAMA) generates the exact same premium to a residential property by itself, as two or more components in tandem may create more value than the sum of the parts. Nonetheless, considering that most companies have already been ISO9001-certified prior to considering an ISO14001 certification, they, as separate variables, are inevitably highly correlated which could be an issue when using methods such as hedonic models. This renders the assessment of the impact on property price solely attributed to ISO14001 rather problematic if they are studied together.

Practical implications - In the short-run, ISO14001 certification, as a public relations tool, might actually help flats within these developments to gain an advantage over the competitors within the district, or at least offset the adverse impact of some of its intrinsic defects in order to stay competitive (for instance, the age issue and the smaller brand name effect due to the development’s lack of scope), but not in the long-run.

Originality/value - The paper has provided some insights regarding the effect of various management standard certifications in property management, from the perspective of the end-users (i.e. homebuyers), rather than from that of those involved in the operations as seen in previous studies. This serves as a reference for developers, property managers, buyers, and users alike.

by Eddie Chi-man Hui, (The Hong Kong Polytechnic University), Cheuk-kin Tse, (The Hong Kong Polytechnic University), Ka-hung Yu, (The Hong Kong Polytechnic University)
Journal of Facilities Management via Emerald Group Publishing Limited www.emeraldinsight.com
Volume 12, Issue 2

The Capitalization of Insurance Premiums in House Prices

Abstract: This study uses Miami-Dade County, Florida home sales, and Citizens Property Insurance Corporation data for the period 2004 through 2009 to measure the capitalization effect of increases in premiums on house prices. Using hedonic pricing models, spatial autocorrelation models, and difference-in-differences models, we find that new information was conveyed to homeowners in the higher risk areas by the 2004/2005 storms and that consumers appear to use the insurance premium as a “risk signal.” We also find some support for the hypothesis that the risk of potential hurricane losses is communicated to potential homebuyers through windzone maps.
[From] 2000 through 2010 homes sold for an average price of $312,312 with a minimum price of $50,000 and a maximum of $16,800,000.... Homeowners during this time period spent an average of $2,600 per year for property insurance with premiums as high as $180,000 per year.... The changes in insurance premiums were dramatic: the one- and two- year changes were negative in some years and nearly $1,000 (43% increase for one year and 69% for two years in percentage terms) in 2006....
There is no evidence to support H1, a blanket reduction in house prices due to a re-evaluation of risk following the 2004/2005 storm seasons. To test the second hypothesis, controls for location within higher windzones are included in the models. It appears that the support for the second hypothesis is mixed. The parameter estimate for the 140 MPH windzone is negative and significant, but the parameter for the 150 MPH windzone is positive and significant.
The coefficient on PctΔPremL1 is negative (-0.0618) showing that the one-year increase in premium leading up to the sale had an adverse impact on selling price. The coefficient is -0.0618, indicating that a 100 percent increase in the premium would result in a .0618 decrease in the log price of the average house. In other words, a premium increase of $2,602 (100% increase in average premium) would result in a $23,468 drop in sale price of the average house (from $391,597 to 368,129). For the actual average one-year premium increase of 13.04 percent ($339.30), the house price would have decreased by $3,143.09. This represents a cap rate of 10.80 percent.... The coefficient of the two-year premium change indicates that a 100 percent increase in the premium would result in a .0552 decrease in the log price. For the actual two-year increase in the premium of 20.61 percent ($536.27), the average house price declined $4,429.84. This represents a cap rate of 12.11 percent.
by Charles Nyce 1, Randy E. Dumm 2, G. Stacy Sirmans 3 and Greg Smersh 4
The Journal of Risk and Insurance via Wiley Online Library http://onlinelibrary.wiley.comVolume 81, Issue 1; Article first published online: March 15, 2014
1. Assistant Professor of Risk Management and Insurance at the Florida State University cnyce@cob.fsu.edu.
2. the William T. Hold Professor of Risk Management and Insurance at the Florida State University.
3. the Kenneth G. Bacheller Professor of Real Estate at the Florida State University. 
4. Assistant Professor of Real Estate at the University of South Florida. . The authors wish to thank the Florida Catastrophic Storm Risk Management Center for financial support of this article.