Spatial hedonic modelling of high-rise residential housing market : assessing environmental externalities of urban streams

Abstract

Urban streams, a defining feature of urban landscape, are key and precious natural elements remaining in urbanized areas, playing a critical role in sustaining human society. Across the world, the hydromorphological and environmental status of urban streams has been adversely impacted by a variety of human activities during the process of urban expansion and densification. Yet, these streams could concurrently bring about both positive externalities (amenities) accruing to the view of waterscape and recreational opportunities as well as negative externalities (disamenities) associated with water pollution and other nuisances. The assessment of environmental externalities of urban streams is of broader policy interest in the domains of urban land use planning, river restoration, and environmental management, in response to an increasing emphasis on the ecosystem services derived from natural resources and the expanding effort to resurrect urban watercourses’ amenities worldwide.

Using Guangzhou (south China) as a case study, the environmental externalities of urban streams in compact, high-rise urban context have been quantified via spatial hedonic modelling approach which incorporates a novel ‘cube contiguity’ matrix developed by the author. This cube contiguity matrix comprises a 3-D spatial weighting matrix and takes both vertical and horizontal spatial interactions into account. The test statistics reveal that the 3-D spatial hedonic models could generate more robust and accurate estimates, in comparison with the traditional ordinary least squares and 2-D models.

At the micro-neighbourhood level, waterfront location, view of and proximity to a polluted urban stream could generate negative externalities (lowering property prices). These negative externalities would be particularly amplified amongst apartments that are located on the 10th or lower floors. When two bifurcated urban streams are presented, homebuyers tended to fine-tune their decisions based on a holistic evaluation of the chemical, physical and ecological features of these streams. The existence of two streams could generate a cumulative impact on property prices.

At the macro-city level, it is found that both waterfront location and stream view are negatively related to property price, but good accessibility to urban streams could generate positive externalities. Despite the odour, visual and health-related disamenities of polluted streams, these waterbodies per se are rare natural resources in the high-rise urban fabric. The positive externalities (amenity effects) are mainly associated with riverine greening. River restoration projects, which slightly improve water quality and riverine recreational facilities could not significantly change the prices of nearby properties. Future restoration initiatives should focus on improving the water quality and increasing riverine recreational opportunities.

As a key methodological contribution to the literature, the ‘cube contiguity’ matrix developed in this study improves the performance of the conventional 2-D spatial matrix by capturing the long-ignored spatial interactions amongst apartment units along both vertical and horizontal dimensions. This study may serve as a useful framework to evaluate the environmental externalities of urban waterbodies, set the priorities for stream restoration, and plan multi-functional blue-green spaces with respect to the preferences of homebuyers for environmental amenities in high-rise housing markets.