The effect of proximity of industrial building clusters on nearby residential property price

Abstract

In Hong Kong, mixed land uses are common, and residential estates are close to the industrial zones. The impact of industrial buildings in Hong Kong on the value of nearby house prices has not been studied. This study aims to investigate the external effects of industrial buildings in Hong Kong on the values of neighbouring residential properties. Five areas in Hong Kong, namely Tsing Yi, Lai Chi Kok, Tsuen Wan, Tuen Mun, and Fo Tan were studied. These regions are the main industrial clusters with appropriate groups of residential areas to be studied. The real estate transactions from January 2019 to January 2022 in selected estates of these five areas was included for analysis. Total of 4361 residential estates transactions was collected from a leading property database online after cross-checking the validity of the data. There are two parts of the study. In the first part of the study, Hedonic Price Model is used to analyse the various neighbourhood industrial characteristics on the effect of the property price of the neighbouring apartments. General linear model is used with robust standard error for correction of heteroskedasticity. Both regression of whole sample of five districts and regression analyses of segmented individual district are performed. In the second part of the study, field study of individual regions to examine the different environmental characteristics and pollution issues that can affect the valuation of the apartments. Methods used included map readings with environmental analysis, supported by noise level survey in selected areas. The noise levels of different groups of sites are compared by statistical analysis. The results of this study show higher floor levels, large saleable floor area, younger age of residential buildings results in higher price of the flats. Better general view of the residential flats results in higher price of the flats in overall. However, in some regions, the positive effect of better general view is weakened or non-significant. It may be because some flats with good view are affected by nuisances attributed to neighbouring environmental and pollution problems. Shorter distance to Mass Transit Railway (MTR) overall corresponds to higher housing price. It shows that the accessibility to Mass Transit Railway is an important determinant of housing value. Similar finding is found in Tsuen and Fo Tan, while the impact of walking time to MTR is non-significant in Tsing Yi and negative in Lai Chi Kok. The time spent in travelling from the district MTR station to the Central MTR station has a negative impact on housing values. This is consistent with the housing price decreases with increase in distance from Central Business District. In general, shorter distance to the nearest industrial buildings negatively impacts housing values. It is consistent with study by de Vor and de Groot (2011) for the relation of negative impact on residential property prices with closer distance an industrial site. In overall analysis of all districts shows the longer distance to the centre of the industrial cluster, the lower the price of residential property. Analysis of individual districts show in some regions, the impact of close distance to industrial building on housing value is non-negative. The effect of distance to the centre of the industrial cluster is inconsistent, which can be positive or negative in individual regions. The implication is that buyers are concerned about the distance to the nearest industrial building rather than the distance to the industrial cluster centre. Generally, partial (1% to 60 %) industrial building view has positive effect on property price. Overall, good external appearance of industrial buildings corresponds to a higher housing value while poor appearance of industrial buildings has negative impact on housing price. For the impact of possessing industrial building view on housing value, whole districts analysis found that it is non-negative. In the segmented analysis, its shows that in two individual regions namely Fo Tan and Lai Chi Kok, there is negative impact of possessing industrial building view on housing value. In other regions the impact is either positive or non-significant. For the impact of external appearance of industrial buildings to housing value, overall analysis shows that good appearance of industrial buildings corresponds to a higher housing value. Poor appearance has negative impact on housing price. For individual regions, the effect of good external appearance of industrial buildings on housing value is either non-negative or positive, and it echoes with findings in the overall analysis. Besides, the result of this study shows that the larger industrial area, the higher housing price. It implies that the size of industrial cluster has no negative impact on housing value. The field studies shown odour from the polluted sea, unsightly river or noise from the road may adversely impact on the prices of nearby houses in individual districts. Particularly, the field study finds noise pollution caused by road traffic is worse than that from industrial buildings. It echoes with the study by To, et al. (2015). These may explain some findings of the non-negative impact of industrial buildings on the housing value. There are several reasons to explain the various kinds of non-negative or positive impact of industrial buildings on residential prices: (1) The pollution problem caused by industrial buildings is limited as many industrial buildings in Hong Kong has changed to non-industrial uses, such as offices, retail space, warehouses, arts and cultural use, which produce less pollution; (2) The negative externalities from others disamenities such as the polluted sea, unsightly river or noise from the road can be more severe than those from the industrial buildings, which causes significant negative impact on the housing value; (3) The investors have different prioritization in decision rules that they may concern more on attributes of housing or accessibility rather than the attributes of industrial buildings in the valuation of the property in their choice; (4) Some of the industrial buildings are refurbished or redeveloped. Their pleasant looking appearance offsets the negative effect from other attributes of industrial buildings; (5) Scarcity of housing supply results in limitation of choices of housing flats. Therefore, the investors may be forced to purchase housing flats despite they possess industrial view; (6) The housing markets are heterogenous, different submarket or region are affected by complex local factors which may modify the effect of industrial buildings to housing price; (7) The decision of home buyers may be affected by sentiment, in this case they may make decisions ignoring the presence of industrial buildings nearby. This study attempts to bridge the research gap and makes important contributions. First, the study broadens limited research on the understanding of effect of externalities of industrial buildings to the housing value. Second, the study confirmed the near distance to the neighbouring industrial building can have negative impact on the housing price. It is important to know the mechanism of the impact of industrial building as it is related to urban planning. Third, this study finds that the industrial building view or a good-looking exterior of the industrial building may have non-negative impact on housing price. These are important in the valuation of residential properties as appropriate adjustments may be needed to reflect the real situation. Fourth, to the best of author’s knowledge and through search in peer-reviewed databases, there is no previous study that has empirically explored the effects of industrial building on the housing values in Hong Kong in an academic setting.