An empirical study on price variations of different types of views of waterfront premises over Hong Kong’s property cycles

Abstract

Prevalent studies have revealed that water view carries positive effects to the values of residences. Yet, the variations in such premiums owing to the different characteristics incorporated within the water view, and during different stages of real estate cycles have yet to be explored adequately. A wide variety of housing units with different natures of water views in Hong Kong along with ample property transaction data have enabled a detailed study to fill the gaps in this area of research. This dissertation suggests the use of the Ordinary Least Square hedonic pricing regression model to investigate the possible premiums of sea-view properties owing to their different view types. A total of 39,536 transaction records are adopted within the study, which are acquired from 46 estates in 18 district constituency areas across the period from the beginning of 2015 to the end of 2020, to test the hypotheses that sea-view properties with an additional cemetery view, or have once been disturbed by maritime hazards, have lower premium when compared to that of a normal sea view, along with the possible positive spillover effect from sea-view properties on adjacent non-sea-view properties, and the relative price performance of sea-view properties over cyclical market movements. Though the negative effects of cemetery views to housing values have been unveiled previously, the empirical results of this study indicate that sea-view attributes can cancel out most of the penalties brought by cemetery views, leaving the original premium of a lone sea view. Typhoon-affected properties generally suffer a -2.37% loss in value, while such penalty even heightened for typhoon-affected sea-view properties which completely wipes out the original premium brought by the sea-view attribute. There is also a negative spillover effect from sea-view properties to non-sea-view properties within the same building, which declines in magnitude when the properties’ distance from waterfront increases. Last but not least, the value of sea-view properties outruns the general market throughout the sample period, owing to its relatively outstanding performance during concurrent boom months, together with its conservative price action during the bust months. By delving into the value of different sea views in a more detailed perspective, while disclosing their relative price actions during both market uptrends and downtrends, this could inform and act as a reference for government officials, developers, and homebuyers during decision making.