Impact of access to sunlight on residential property values: an empirical analysis of the housing market in Shanghai
Abstract
As an important environmental amenity, sunlight brings us a large number of benefits and improves the quality of our daily lives, and its welfare measurement depends on concrete living conditions. The purpose of this article is to empirically document the non-marketed value of sunlight in light of the view orientation of an apartment in the context of the housing market. Using a hedonic pricing model estimated with the real estate transaction data over 40,000 housing units in 2019–2021 in Shanghai, it is found that: (1) homeowners, on average, are willing to pay an extra 7.2% to choose the apartments with a high level of sunshine (facing south), relative to those with no direct access to sunlight (facing north); (2) the value of sunlight shrinks with pollution and becomes larger if living in a higher apartment; (3) residents living in higher units have a larger willingness to pay for the sunlight and environmental quality improvement. These empirical findings shed light on the welfare measurement of sunlight and have profound implications for the capitalization of environmental amenities reflected in housing prices.
Keyword : environmental amenity, value of sunshine, hedonic pricing, housing market
How to Cite
Zhong, Y., Lu, J., & Li, Z. (2022). Impact of access to sunlight on residential property values: an empirical analysis of the housing market in Shanghai. International Journal of Strategic Property Management, 26(5), 385–396. https://doi.org/10.3846/ijspm.2022.18004
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Chan, E., Yim Yiu, C., Baldwin, A., & Lee, G. (2009). Value of buildings with design features for healthy living: a contingent valuation approach. Facilities, 27(5/6), 229–249. https://doi.org/10.1108/02632770910944952
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Chen, Y., Ebenstein, A., Greenstone, M., & Li, H. (2013). Evidence on the impact of sustained exposure to air pollution on life expectancy from China’s Huai River policy. Proceedings of the National Academy of Sciences, 110(32), 12936–12941. https://doi.org/10.1073/pnas.1300018110
Des Rosiers, F., Bolduc, A., & Thériault, M. (1999). Environment and value Does drinking water quality affect house prices? Journal of Property Investment & Finance, 17(5), 444–463. https://doi.org/10.1108/14635789910294877
Engerer, H. (2011). Security as a public, private or club good: some fundamental considerations. Defence and Peace Economics, 22(2), 135–145. https://doi.org/10.1080/10242694.2011.542333
Faux, J., & Perry, G. M. (1999). Estimating irrigation water value using hedonic price analysis: a case study in Malheur County, Oregon. Land Economics, 75(3), 440–452. https://doi.org/10.2307/3147189
Guntermann, K. L., & Norrbin, S. (1987). Explaining the variability of apartment rents. Real Estate Economics, 15(4), 321–340. https://doi.org/10.1111/1540-6229.00435
Guven, C. (2012). Reversing the question: does happiness affect consumption and savings behavior? Journal of Economic Psychology, 33(4), 701–717. https://doi.org/10.1016/j.joep.2012.01.002
Harrison, D., & Rubinfeld, D. L. (1978). Hedonic housing prices and the demand for clean air. Journal of Environmental Economics and Management, 5(1), 81–102. https://doi.org/10.1016/0095-0696(78)90006-2
Jim, C. Y., & Chen, W. Y. (2007). Consumption preferences and environmental externalities: a hedonic analysis of the housing market in Guangzhou. Geoforum, 38(2), 414–431. https://doi.org/10.1016/j.geoforum.2006.10.002
Jim, C. Y., & Chen, W. Y. (2009). Value of scenic views: hedonic assessment of private housing in Hong Kong. Landscape and Urban Planning, 91(4), 226–234. https://doi.org/10.1016/j.landurbplan.2009.01.009
Kelejian, H. H., & Prucha, I. R. (2001). On the asymptotic distribution of the Moran I test statistic with applications. Journal of Econometrics, 104(2), 219–257. https://doi.org/10.1016/S0304-4076(01)00064-1
Kong, F., Yin, H., & Nakagoshi, N. (2007). Using GIS and landscape metrics in the hedonic price modeling of the amenity value of urban green space: a case study in Jinan City, China. Landscape and Urban Planning, 79(3), 240–252. https://doi.org/10.1016/j.landurbplan.2006.02.013
Lancaster, K. (1979). Variety, equity, and efficiency: product variety in an industrial society. Columbia University Press. https://doi.org/10.7312/lanc94538
Lansford Jr, N. H., & Jones, L. L. (1995). Recreational and aesthetic value of water using hedonic price analysis. Journal of Agricultural and Resource Economics, 20(2), 341–355.
Leather, P., Pyrgas, M., Beale, D., & Lawrence, C. (1998). Windows in the workplace: sunlight, view, and occupational stress. Environment and Behavior, 30(6), 739–762. https://doi.org/10.1177/001391659803000601
Levinson, A. (2012). Valuing public goods using happiness data: the case of air quality. Journal of Public Economics, 96(9–10), 869–880. https://doi.org/10.1016/j.jpubeco.2012.06.007
Lip, E. (1995). Feng Shui: environments of power: a study of Chinese architecture. John Wiley & Son Ltd.
Lu, J. (2018). The value of a south-facing orientation: a hedonic pricing analysis of the Shanghai housing market. Habitat International, 81, 24–32. https://doi.org/10.1016/j.habitatint.2018.09.002
Mak, M. Y. (1998). Application of Feng Shui principles to major cities in the world. In G. Baird & W. Osterhaus (Eds.), Science and design (pp. 83–89). Victoria University of Wellington.
Mak, M. Y., & Ng, S. T. (2005). The art and science of Feng Shui: a study on architects’ perception. Building and Environment, 40(3), 427–434. https://doi.org/10.1016/j.buildenv.2004.07.016
Mok, H. M. K., Chan, P. P. K., & Cho, Y.-S. (1995). A hedonic price model for private properties in Hong Kong. The Journal of Real Estate Finance and Economics, 10(1), 37–48. https://doi.org/10.1007/BF01099610
Poudyal, N. C., Hodges, D. G., & Merrett, C. D. (2009). A hedonic analysis of the demand for and benefits of urban recreation parks. Land Use Policy, 26(4), 975–983. https://doi.org/10.1016/j.landusepol.2008.11.008
Ready, R. C., & Abdalla, C. W. (2005). The amenity and disamenity impacts of agriculture: estimates from a hedonic pricing model. American Journal of Agricultural Economics, 87(2), 314–326. https://doi.org/10.1111/j.1467-8276.2005.00724.x
Rosen, S. (1974). Hedonic prices and implicit markets: product differentiation in pure competition. Journal of Political Economy, 82(1), 34–55. https://doi.org/10.1086/260169
Sander, H. A., & Polasky, S. (2009). The value of views and open space: estimates from a hedonic pricing model for Ramsey County, Minnesota, USA. Land Use Policy, 26(3), 837–845. https://doi.org/10.1016/j.landusepol.2008.10.009
Tam, C. M., Tso, T. Y. N., & Lam, K. C. (1999). Feng Shui and its impacts on land and property developments. Journal of Urban Planning and Development, 125(4), 152–163. https://doi.org/10.1061/(ASCE)0733-9488(1999)125:4(152)
Thanasi, M. (2016). Hedonic appraisal of apartments in Tirana. International Journal of Housing Markets and Analysis, 9(2), 239–255. https://doi.org/10.1108/IJHMA-03-2015-0016
Tu, M., Zhang, B., Xu, J., & Lu, F. (2020). Mass media, information and demand for environmental quality: evidence from the “Under the Dome”. Journal of Development Economics, 143, 102402. https://doi.org/10.1016/j.jdeveco.2019.102402
Wang, Y., Feng, S., Deng, Z., & Cheng, S. (2016). Transit premium and rent segmentation: a spatial quantile hedonic analysis of Shanghai Metro. Transport Policy, 51, 61–69. https://doi.org/10.1016/j.tranpol.2016.04.016
Zhang, C., Shen, C., Yang, Q., Wei, S., Lv, G., & Sun, C. (2020). An investigation on the attenuation effect of air pollution on regional solar radiation. Renewable Energy, 161, 570–578. https://doi.org/10.1016/j.renene.2020.07.146
Zhang, J., & Mu, Q. (2018). Air pollution and defensive expenditures: evidence from particulate-filtering facemasks. Journal of Environmental Economics and Management, 92, 517–536. https://doi.org/10.1016/j.jeem.2017.07.006