A hedonic pricing study in new town developments in Hong Kong : the effects of new developments on price levels of private residential properties

Abstract

In the past, the government had been carrying out development schemes to cope with the increase in population and to improve the living environment by decentralizing the population from the over-crowded urban districts, through schemes like the New Town Development Scheme which started in the 1970s, and currently exploring ways to develop New Development Areas (NDAs) to enhance land supply for inflow of population to such areas. Various research in investigating the impacts of certain neighborhood attributes on prices of nearby housing properties can be found easily. Yet, studies which aim to find impacts of multiple developments at a wider scope over a large time span can be rarely found, due to the difficulties in gathering large amounts of research on the progressive developments of multiple areas, and to collect large amounts of transactional data to be observed. Considering the complexity of such investigations, this paper aims to provide a framework to incentivize further studies of impacts of progressive developments on housing prices of the area. This paper will focus on developing a model which quantifies the extent of developments under the context of Tseung Kwan O New Town by studying the prices levels of Metro City, a large private housing estate with over 20 years of history to experience the impacts of developments in the area for the past two decades. This research shall hopefully kick-start additional studies and ultimately developing a refined, generalized model that is applicable to produce accurate predictions of future price trends of housing properties under government developing schemes, such as the upcoming NDAs, Northern Metropolis, Lantau Tomorrow, etc. The empirical results generated from the Hedonic Pricing Model of the study showed interesting outcomes, where certain categories of developments do carry impacts that are similar to the intuitive perceptions of the general public, and some categories of developments proving otherwise. The implications of such investigations are also explored and discussed to realize their values to different parties involved in the housing markets, such as the government, property developers, and buyers and sellers. Although the model generated from this study contains certain assumptions and incompleteness due to limitations of the research, it still contains significance in helping to understand the long-term impacts of government-led development schemes on housing prices. Evaluation of the research methodology and model is also included to provide improvements and outlooks to continuing the further studying of the topic in the future.