Seminar paper. Professor Kunst. The environmental property price effect in Padua. using panel data

Transcription

1 Seminar paper Professor Kunst The environmental property price effect in Padua using panel data by Petra Amrusch 2005

2 The environmental property price effect in Padua using panel data 1. Introduction The motivation posed by this seminar paper is the evaluation of the impact of air quality on the housing market in Padua using panel data from March 2003, May and July Possible effects of air pollutants caused by urban traffic on property prices will be exploited on the hedonic pricing model (HPM), introduced by Rosen (1974). Two data sources provide the essential information for this study. The ARPAV (The Regional Agency for Environmental Prevention and Protection of Veneto) provides data on C 6 H 6 (benzene) and traffic densities for which weighted averages were calculated.. Data on housing characteristics and property prices are obtained from advertisements published by various real estate agencies in the brochures Attico, Proposte Immobiliari, Casaffari, Vetrina immobiliare, Il Corriere Immobiliare. According to Freeman (1994) and brokers in Padua, the data published by real estate brokers assure that market prices are used. 2. Estimation of the property price effect On the basis of the specification plan of residential areas and variants (e.g. town development plan 1, the residential zoning plan, 2 samples of properties are drawn from residential settlements in the centre, outlying residential quarters and semi-central residential settlements that are mainly adjacent to the centre that should be homogenous with respect to greenery, public facilities, quiet, distance to the centre and accessibility

3 All 42 observations in the sample are defined by similar characteristics apartments are chosen in districts with similar socio-economic, criminality, etc. criteria, but differing in terms of environmental criteria (traffic density, benzenes) etc. The aim of the panel is to describe how 14 apartments the influence of different characteristics influence the property price/sqm over 3 points of time. Since it is impossible to find 14 apartments that are resold/bought 3 times within a period of half a year, different apartments with very similar housing characteristics (e.g. number of rooms, age of the apartment (new, restored etc.), floor) are chosen in one area/street in the way that 3 observations could be assumed to be representative for 1 apartment over 3 periods. The sample was also not random in the sense that in the second two periods only apartments were included at a similar or slightly higher price level/sqm representing one apartment (resold or offered 3 times) in the first period, since it is not realistic that the same house in the same location is offered/sold first at a high price and after 2 month at a lower price due to different reasons: 1. The general housing market is on an upward trend in Italy 3 (and Padua) 2. If a house is not sold within a short period, an experienced owner/broker would not decrease the price at once, otherwise his ability in price setting (e.g. from appraisals)/professionalism would not be questionable and his reputation would suffer.; L'agente immobiliare che alza artificialmente il prezzo per soddisfare il proprietario, ed ottenere cosi' l'incarico a vendere, dimostra una evidente mancanza di professionalità, e quindi anche una scarsa affidabilità Auch die Bewertung der Immobilie unter dem Marktpreis, die dann der Makler meist durch einen Aufpreis ausgleicht, weist ebenfalls auf mangelhafte Professionalität hin und kann illegal sein, wenn der Verkäufer dadurch geschädigt wird. Überdies ist diese Methode, bei der zwischen Verkäufer und Makler ein Minimalpreis festgelegt wird und der Makler den

4 Aufpreis mit dem Käufer aushandelt, nie zum Vorteil des Verkäufers und wird daher selten angewendet 4 ) 3. The hedonic model relies on real market prices : if a house would be offered at a lower price within this short time period due to other reasons (transactions among relatives 5 or if the seller is forced to sell due to financial problems), the real market price would be biased and the inclusion of such observations would not be reflect the assumptions of the hedonic model. 4. Pooled regression results The first variant of the hedonic specification employed here is: 1. Regression including D001 and D010: Dependent Variable: LOG(SQMP?) Method: GLS (Variance Components) Date: 09/13/05 Time: 12:47 Sample: Included observations: 3 Total panel observations 42 Variable Coefficient Std. Error t-statistic Prob. C D D C6H6? LOG(SQ?^2) Random Effects 1 C C C C C C C C C C C C C C GLS Transformed Regression R-squared Mean dependent var Vgl. Vainio, Matti: Traffic noise and air pollution 1995 p. 55 3

5 Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Durbin-Watson stat Unweighted Statistics including Random Effects R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Durbin-Watson stat where D001 and D010 are positive due to the increasing price level in the sample and a 1 unit reduction in the C 6 H 6 pollution level decreases the property price/sqm by 0.004%. There is also a significant relation between LOG(square metres*square metres) and the LOG(property price/sqm). Other individual housing characteristics are explained by random effects. The fitting is satisfactory (97.5 the variation in P/sqm are explained). The DW-Statistic shows a negative autocorrelation of residuals after the inclusion of the Dummy Variables D001 and D010 in comparison to the following pooled regression: 2. Regression without TimeDummy variables D001, D010 Dependent Variable: LOG(SQMP?) Method: GLS (Variance Components) Date: 09/13/05 Time: 12:57 Sample: Included observations: 3 Total panel observations 42 Variable Coefficient Std. Error t-statistic Prob. C C6H6? LOG(SQ?^2) Random Effects 1 C C C C C C C C C C C C C C GLS Transformed Regression R-squared Mean dependent var

6 Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Durbin-Watson stat Unweighted Statistics including Random Effects R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Durbin-Watson stat In this case the DW-Test shows no autocorrelation of residuals, although the sample was chosen non-random. 3. Regression including D001 and an additional housing characteristic Dependent Variable: LOG(SQMP?) Method: GLS (Variance Components) Date: 09/13/05 Time: 13:02 Sample: Included observations: 3 Total panel observations 18 Cross sections without valid observations dropped Variable Coefficient Std. Error t-statistic Prob. C D C6H6? LOG(SQ?^2) GARD? Random Effects 1--C C C C C C GLS Transformed Regression R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Durbin-Watson stat Unweighted Statistics including Random Effects R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Durbin-Watson stat Including another housing characteristic : garden that differs more than other housing variables and D001 also increases the DW-Statistic: 5

7 4. Regression results with inclusion of D010 without D001: Dependent Variable: LOG(SQMP?) Method: GLS (Variance Components) Date: 09/13/05 Time: 13:03 Sample: Included observations: 3 Total panel observations 18 Cross sections without valid observations dropped Variable Coefficient Std. Error t-statistic Prob. C D C6H6? LOG(SQ?^2) GARD? Random Effects 1--C C C C C C GLS Transformed Regression R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Durbin-Watson stat Unweighted Statistics including Random Effects R-squared Mean dependent var Adjusted R-squared S.D. dependent var S.E. of regression Sum squared resid Durbin-Watson stat Including merely D010, it is notable that the Dummy variable is insignificant. Summarizing, C 6 H 6 - pollutants that define the negative effect of air pollution on the property price/sqm in the semicentral and outlying areas of Padua in the first half of

8 5. References 1. Agenzia Regionale per la Prevenzione e Protezione Ambientale del Veneto ARPAV: 1. Rapporto annuale sullo stato dell ambiente a Padova MINISTERO DELL AMBIENTE E DELLA TUTELA DEL TERRITORIO; Bando 2000 per il cofinanziamento dei processi di Agenda 21 locale Freeman III, A. Myrick: The Measurement of Environmental and resource values, Theory and Methods Resource for the future, 2. Aufl., Washington Vainio, Matti: Traffic noise and air pollution Helsinki: Helsingin Kauppakorkeakoulu,