The impact of high-rise condos on residential prices: An analysis for Nunoa (Santiago de Chile)

XVI EUROPEAN REAL ESTATE SOCIETY CONGRESS | Milan, Italy 23th, 26th of June 2010

Carlos, Marmolejo Duarte;Esteban, Skarmeta Cornejo &Carlos, Aguirre Nunez

Centre for Land Policy and Valuations Polytechnic University of Catalonia

The impact of high-rise condos on residential prices: An analysis for Nunoa (Santiago de Chile)

XVI EUROPEAN REAL ESTATE SOCIETY CONGRESS | Milan, Italy 23th, 26th of June 2010

Carlos, Marmolejo Duarte;Esteban, Skarmeta Cornejo &Carlos, Aguirre Nunez

Centre for Land Policy and Valuations Polytechnic University of Catalonia

Research questionThe impact of high-rise condos on residential prices

4

Research question

Whether or not high-rise resindential condos impact on real estate prices of neighbouring housings?

El ruido mensurado

5

Case studyA borough in Santiago de Chile Metropolitan Area

Ubicación de Ñuñoa dentro del Gran Santiago Ubicación de los condominios estudiados en Ñuñoa

Fuente: Elaboración propia

16 sqKm163.000 inhabitantsMedium inconme populationNot homogeneous income levelFormerly single-family housing

2000-2003 59 “high rise” apartment builtAll of them redeveloping the land formerly occupied by single-family housesUp to 19 storiesUp to 47.000 sqMeters

El ruido mensurado

6

Case study

Parking Gym

Street view Piscina Sala de estudio

Private greenareas Games roomSource: www.porta l inmobi l iario.com

"It highlights the opaque perimeter closure (up to 30% by law), as well as

the presence of low-rise houses in the neighborhood"

Typical apartment building in Nunoa

7

Case studyTypical apartment building in Nunoa

Eldo

8

Prostest of original settlers Again gentrification, and other externalities (e.g. shadow & congestion)

Source: Agui rre & Marchant, 2007

Hypothesis & theoryThe impact of high-rise condos on residential prices

10

Hypothesis

High-rise apartment buildings, may produce negative externalities, but they do produce a positive impact on real estate prices of neighboring detached houses.

El ruido mensurado

11

Theoretical frameworkSabatini, Cáceres & Cerda (2001); Cáceres & Sabatini (2004), Salcedo & Torres (2004)

1. There is an improvement in the urban landscape, produced by the emergence of new high-quality buildings and the construction of new, but small, infrastructures around those new residential buildings (e.g. street pavement). Both factors do produce an externality, in the short run, with a positive impact on neighboring real estate prices.

2. The supply of dwellings orientated to medium-high income households produce an gentrification process, which may produce a revalorization process.

3. The increase of population density, produces an emergence of new services in the neighboring areas.

4. The construction of new buildings do impact on the perception of original settlers-owners, and their willingness to ask for their properties (to be redeveloped) increases.

Research agendaThe impact of high-rise condos on residential prices

El ruido mensurado

13

Research agenda

1. Does the impact depends on the size of the condominium?

2. Which is the spatial extend of the impact?

3. Is the impact stationary across all the municipal area of Nunoa?

Used methodology & data

The impact of high-rise condos on residential prices

Methodology

OLS Hedonic price model

n

a aae

n

e es

n

s sv

n

v v ABEBSBVBBPLn11110)(

Structural Social Externalities Accesibility

Geographical weighted regression Hedonic price model

01

22

otherwisehdsih

dw

iiji

ijij

Wij=ponderation factorDij distance between each observation i and j pointHi distance of farest case j

Data (55 covariables)

1.185 sales of single-family houses (Property registry)

DemographicsSocioeconomicsEconomic activity premisesHosing quality

Land use and building potential (Master Plan)

Residential condos features (Municipal buildings permits)

Accesibility indexes (Transcad GIS)

National Census

Main resultsThe impact of high-rise condos on residential prices

El ruido mensuradoModelos MCO

R2 0,576 0,579

R2 corregida 0,574 0,576

Error típ. de la estimación 0,495 0,494

Covariable / factor

B (no estanda-

rizado)s ig.

Beta (estanda-

rizado)

B (no estanda-

rizado)s ig.

Beta (estanda-

rizado)

(Constante) 7,035 - 7,081 -

Superfi cie del predio 0,002 0,00 0,945 0,002 0,00 0,941

Cuadrado de la Superfi cie 0,000 - 0,00 0,420 - 0,000 - 0,00 0,418 -

Factoria l grupos menor NR (+) vs mayor NR (-)

0,148 - 0,00 0,191 - 0,147 - 0,00 0,190 -

Densidad construida en manzana 0,632 0,00 0,126 0,481 0,00 0,096

Dummy año de venta CU 2004 0,341 0,00 0,135 0,324 0,00 0,129

Distancia (m) a colegios particulares-1,20E-04 0,00 0,068 - -1,20E-04 0,00 0,068 -

Presencia de condominios verticales en buffer 300 nd nd nd

Superfi cie de obra nueva (CV) buffer 300m nd nd nd 6,13E-06 0,01 0,059

ANOVA

ModeloSuma de

cuadradosdf

Media cuadrada

Suma de cuadrados

dfMedia

cuadrada

Regres ión392 6 65,41 394 7 56

Res iduos 288 1.178 0,24 287 1.177 0

Total 681 1.184 681 1.184

F Sig. F Sig.

267 0 231 0,00

NR= Nivel de renta

Variable dependiente: Ln Valor de Venta de CU

MCO calibrado por el método de pasos sucesivos

MOD. 1a MOD. 1b

1. Does the impact depends on condominiums size?

•Lot size (+)

•Sq Lot size (-)

•Lower income population (-)

•Population density (+)

•Dist. to private schools (+)

•Dummy presence of

neighbouring condominiums

(n.s.)

•Built floor area of

neighbouring condos (+)

19

2. Which is the spatial extend of the impact?

Statial interdependence B Sig.

new building area (HC) buffer 100m 8,4E-06 0,08

new building area (HC) buffer 200m 4,2E-06 0,19

new building area (HC) buffer 300m 2,4E-06 0,26

new building area (HC) buffer 400m -9,7E-07 0,53

new building area (HC) buffer 500m 4,1E-07 0,70

Dependent variable: Unstandardized residuals from model 1b without new building area (HC) buffer

Source: Self elaboration, independent variable forced into the OLS model (enter)

-2,00E-06

0,00E+00

2,00E-06

4,00E-06

6,00E-06

8,00E-06

1,00E-05

0,000

0,100

0,200

0,300

0,400

0,500

0,600

0,700

0,800

100m 200m 300m 400m 500m

Sig.B

Buffer

Sig.

B

Single family house

d. The weighting constant is 1,340*pi.

Unstandardized Coefficients B in GWR model

N Min. MaxHuber's M Estimator

St.Desv.

Local regressions

significant at 95% level

high income groupsnew building area (HC) buffer 300m 545 -6,03E-05 7,00E-05 3,65E-06 2,06E-05 7%

med-high income groupsnew building area (HC) buffer 300m 567 -3,60E-03 1,41E-03 4,63E-06 2,03E-04 25%

med-low income groupsnew building area (HC) buffer 300m 62 -1,29E-04 3,93E-05 -4,48E-05 4,09E-05 50%

low income groupsnew building area (HC) buffer 300m 11 -1,56E-04 2,77E-05 -1,19E-04 5,78E-05 0%

Sum 1.185 18%

Note: Segmentation of the sample according to an factorial analysis and cluster performed on the percentage of persons by level of education and income

20

3. Is the impact stationary across all the municipal area of

Nunoa?

Division of Nunoa in socioeconomic homogeneous areas using factor and cluster analysis

Final remarksThe impact of high-rise condos on residential prices

22

Final remarks

1. Despite negative externalities, high-rise apartment buildings seems to produce a positive impact, in the short run, on real estate prices of neighboring houses

2. The impact do depends on condominium size, the bigger is the neighboring condo, the bigger is the positive impact.

3. The impact do deeply decrease with the distance.

4. The wealthiest areas in Nunoa, are the most benefited from high-rise building construction. So there is not a spatial convergence on real estate prices, but a divergence produced by a laissez faire urban policy

23

Thank you

Centre for Land Policy and Valuations Polytechnic University of Catalonia

carlos.marmolejo@upc.edu