An empirical study of the impact of proximity to public open spaces on the neighboring private residential property price

Abstract

Previous studies on the impact of proximity to public opens space (POS) on housing prices are inconclusive. On the one hand, POS is an amenity that is valued by nearby residents as it provides space for many outdoor activities and improves air quality, especially in densely populated areas. However, usage of POS also creates negative externalities such as noise and traffic congestions. The first motivation of this study is to contribution to this unresolved issue using data from Hong Kong. In Hong Kong, POS are supplied by both the government (G-POS) and private property owners (P-POS). The latter is usually implemented as a form of developer obligations specified in the land lease. The second motivation of this study is to understand how these two types of POS interact with each other and the resultant impact on nearby housing prices. The empirical results of this study show that G-POS has a positive impact on nearby housing prices. However, the positive impact is lowered by the presence of another P-POS in the vicinity. The results show that prices of private residential housing units in the neighborhood of a G-POS that are closer to another P-POS benefit less from the proximity to the G-POS compared to those that are further away from the P-POS. The result is consistent with the conjecture that G-POS and P-POS are close substitutes. They serve similar functions for the nearby residents. This substitutability of G-POS and P-POS has important implication. First, citizens in Hong Kong are aware of their rights to access and use the P-POS despite being provided and maintained by private owners. This could be a result of increased transparency and promotion by the government on tradition and electronic media. Efforts by scholars who publicized some private property owners’ attempts to block public access to their P-POS also contributed to the public’s awareness of their rights to use P-POS. Second, Hong Kong has serious shortage in developable land, especially in densely populated areas. It is not easy for urban planners to find land for G-POS. The results of this study suggest that imposing P-POS as developer obligation in granting land for development is a good substitute. Another important empirical finding of this study is that P-POS has an in-situ negative impact on housing prices. That is, the housing units of a development that provides P-POS are sold at a discount to similar housing units not in the development. This is likely to be a result of noise and disturbances brought about by public “outside” users of the P-POS which are co-owned by the owners of the housing units in the development. They also have to bear the cost of maintaining and managing the P-POS. Imposing lease conditions that require developer to supply POS when developing a site is a form of attenuation of private property rights, which will lower the development value of the site. Therefore, it is reasonable to compensate the developer for the loss of value in forms of higher plot ratio, lower land premium or other benefits in an equitable and transparent manner.