Are low-end housing purchasers more willing to pay for access to basic public services? Evidence from China

Abstract

Previous studies suggest that generally, access to public services has a positive impact on housing price. However, most of them are silent on whether the impact varies across different housing submarkets. In some contexts like China, compared with high-end counterparts, low-end housing purchasers, generally, have lower income and thus lower car availability (and transportation mobility). As such, they may prefer and attach a higher value to living in the proximity of basic public services (which are essential to life, such as transit). This is likely to be applicable to contexts where purchasing and/or using cars are not fully affordable for low-income households. We use 22,586 second-hand housing data in Xiamen (China) to assess the differential price impacts of access to basic public services in low and high-end submarkets. Results from two-sample two-tailed t-tests and F-tests and hedonic modeling confirm several findings: (1) there are systematic differences between access to basic public services in low- and high-end properties; (2) the two housing submarkets do not follow the same pricing mechanism; (3) access to transit, commercial centers, shopping centers, and sports and cultural centers has positive and significant price impacts in the low-end housing submarket. Yet, this is not the case in the high-end counterpart; (4) the effect of access to basic public services on housing price varies across the two submarkets: typically, access to basic public services has a larger positive price impact on low-end properties than on high-end ones; (5) interestingly, access to shopping centers has a larger price impact in the high-end housing submarket than in the low-end. The findings of this study basically support our hypothesis and also benefit policy prescription. As such, practical implications of the findings are discussed finally. Notably, our argument is that low-end properties buyers are more willing to pay for access to “basic” public services rather than that to premium/high-quality services. By contrast, based on scattered evidence from this study and existing literature, we suspect, though definitely cannot conclude, that high-end properties buyers have a predilection for premium/high-quality amenities, such as natural beauty and prestigious schools.