does comprehensive redevelopment change the housing price gradient? a case study in mongkok, hong...

Does Comprehensive Redevelopment Change the Housing Price Gradient? A Case Study in Mongkok, Hong Kong

Simon Y. YAUDepartment of Public and Social Administration

City University of Hong Kong

ERES Conference 2009

24-27 June 2009


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Part ABackground of the Study


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Your impression of Hong Kong …


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Extent of Building Dilapidation in Hong Kong


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Externalities of Redevelopment

Costs and benefits of a redevelopment project net monetary gains to measure a government’s efficiency in

an urban redevelopment project (Broadway, 1974)

When assessing the project benefits rise in property value of the redevelopment site direct and indirect jobs created by the project possible spillover effects of the project

Large-scale improvement or redevelopment projects increase the values of properties in their vicinity

(e.g. Rosenthal and Helsley, 1994; Baleiras et al., 2004)


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Research Gap and Aim of this Study

Few empirical studies

exploring the externalities of redevelopment on neighbouring properties

To empirically study

effects of comprehensive redevelopment on the market prices of neighbouring properties

by hedonic price analysis of a set of panel data in Hong Kong


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Part BAnalytical Framework and Methodology


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Argyle Street/Shanghai Street Redevelopment Project- Langham Place (office tower,

hotel and shopping mall)

- completed in end of 2004


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Mongkok


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Analytical Model

Founded on Rosen’s (1974) seminal work,

price of a property treated as aggregate of the implicit prices of its property attributes:

property age

floor area

floor level (i.e. vertical location in a building)

external environment

… etc.


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Hedonic Price Model

ssss

sss

sststst

REDAFTERDISTDIST

AREAAREAFLOOR

FLOORAGEAGERPRICE

_

ln

21

265

24

32

210

Variable Description

RPRICEst real transaction price of property s at time t (in HK$ million)

AGEst age of property s at time t, equating the difference between the date of the issue of the occupation permit and the transaction date (in years)

FLOORs floor level of property s

AREAs saleable floor area of property s (in square feet)

DISTs distance between property s and the centre of Langham Place complex (in metres)

AFTER_REDs is a dummy variable which equals 1 if the transaction was engaged after the opening of Langham Place and zero if otherwise


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Part C Data Descriptions and

Analysis Results


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Source and Descriptive Statistics of the Data

Continuous Variable Maximum Mean MinimumStandard Deviation

RPRICE (in HK$ million) 12.11 2.18 0.02 2.04

AGE (in years) 589.00 238.67 0.00 168.53

FLOOR 51.00 13.79 1.00 11.04

AREA (in square feet) 1,006.81 358.57 0.00 115.74

DIST 500.00 237.12 35.00 98.41

Transaction data for residential properties within 500 metres from the centre of Langham Place from January 2003 to September 2006 obtained from the Economic Property Research Centre 6,475 property transactions

2,962 (~ 45.75%) engaged after the opening of Langham Place


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Dependent Variable: lnRPRICE

Independent Var. Coefficient Std. error t-statistic p-value

CONSTANT -0.411107 0.028999 -14.17652 0.0000 **

AGE -0.003759 0.000101 -37.39666 0.0000 **

AGE2 2.87 x10-6 1.93 x10-7 14.86835 0.0000 **

FLOOR 0.010424 0.001112 9.373329 0.0000 **

FLOOR2 -4.40 x10-5 2.47 x10-5 -1.783935 0.0745 #

AREA 0.003870 8.21 x10-5 47.14263 0.0000 **

AREA2 -1.51 x10-6 6.59 x10-8 -22.90464 0.0000 **

DIST -8.36 x10-5 4.23 x10-5 -1.975285 0.0483 *

DIST*AFTER_RED 2.29 x10-5 2.86 x10-5 0.799986 0.4237

Adjusted R-squared 0.857634 Durbin-Watson statistic 1.002656

F-statistic 4876.035 Akaike Info Criterion 0.366094

Prob (F-statistic) 0.000000 Number of observations 6,475


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Part D Implications of the Analysis Results

and Discussions


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Why No Positive Externalities?

Confirming previous studies (by Chau et al., 2004; Lai et al., 2007)

comprehensive redevelopment projects in Hong Kong not exerting a net positive price effect on the residential properties in the neighbourhoods

Non-existence of a net positive externality

counter effects of the negative environmental impacts created by the gigantic Langham Place complex (e.g. reduction in openness and blockage of natural lighting and ventilation)

a so-called ‘screen-wall effect’

lowering the rate of air flow in the area

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Gentrification?

Smith’s (1979) explanation of gentrification rent gap ‘the disparity between the potential ground rent level and the actual ground rent capitalized under the present land use’

Results of this study suggesting rent gap may not exist

Spatial-price gradient the properties in the neighbourhood of Langham Place not changing after the project completion

seemingly not supporting the rent gap theory

dummy variable AFTER_RED is added to the equation

insignificant at the 10 percent level

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Concluding Remarks

Redevelopment thought to have positive externalities on nearby properties

Hedonic price analysis spatial-price gradient of neighbouring properties not changing

confirming findings of Chau et al. (2004) and Lai et al. (2007)

doubtful usefulness of rent gap theory

Further studies suggested to investigate if gentrification is observed in the environs of Langham Place

impacts of different types of urban regeneration projects

public administrators knowing how urban regeneration should proceed with a view to better economic sustainability


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Thank You !

For comments and questions,

please e-mail me at [email protected]

ACKNOWLEDGEMENT

The work described in this paper was supported by a grant from the Research Grants Council of the Hong Kong Special Administrative Region, China (Project No. CityU 1508/08).

does comprehensive redevelopment change the housing price gradient? a case study in mongkok, hong...

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