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
Volume 12, Issue 2

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