A study of accessibility and tradeoffs to housing choices

Abstract

The distance effect from the city centre on property price has long been considered as a major factor for a household’s decision on residential location choice given to understand that an acquisition of a home is the biggest single investment for a family. The decision is not simply a demand for the physical attribute pertaining to the building but also other housing and location attributes such as accessibility, size, tastes, neighborhood qualities and tradeoffs.

The property prices in many countries have supported the saying of site value dependent on distance from the central business district (CBD). Major factors are transport costs and land prices. If people live closer to city centre, the savings from transport costs will be maximized. Difference in land value is also observed with distance from city centre and in the property market. Hence, household demand for property confronts tradeoffs between longer and more costly commutation and cheaper housing prices.

This paper studies the distance effects or accessibility by including distance as variables in the hedonic model. Hedonic regressions are used to estimate the demands for the characteristics of a differentiated good such as the residential housing. In real estate study, we usually estimate housing price as a function of distance from the city centre. We expect to observe land prices decline with distance from the city centre which is referred to have a negative land price gradient. To assess the effects of the access attributes such as distance, commuting time and cost offer important inspiration in understanding the reasons for a household’s move and helps to indicate their final home choices. Generally speaking, higher income households may give higher value on access, married persons on shopping, retirees may choose to live closer to medical centre or their children and young families expecting children may choose to live near good schools and larger houses. Households who move for easier commute may indicate that accessibility is a priority.

This paper examines the location choices of home owners, explores the major determinants in making a home owning decision, examines household’s priorities when choosing a specific location for dwelling and the tradeoffs involved. Empirical evidence relating the price gradient collected via the private residential property market in Hong Kong and a survey conducted by the author by questionnaires confirmed that the negative price gradient does exist and other explanatory variables like age, size, tastes and neighborhood qualities also affect the housing prices and tradeoffs.