Modelling coastal externalities effects on residential housing values

Abstract

PurposeThis paper aims to examine the impact of coastline on the rental value of residential property in proximity to the coastline, using the hedonic pricing model from two perspectives. First, Model 1A–C accounted for estimating the influence of coastal amenities while controlling for other housing attributes influencing rent. Second, Model 2A–C accounted for the interaction between coastal amenities/disamenities and other housing attributes influencing rent.Design/methodology/approachA survey approach was adopted for the data collection process. For both models, property values were measured in proximity to coastline using 0–250 m, 251–500 m and 0–500 m.FindingsFindings revealed that property rental value increases as we move away from the coastline when disamenities are not controlled. The results suggested that for a mean-priced home (N2,941,029 or $8,170) at the mean distance from the coastline (301.83 m), a 1% increase in distance from the coastline would result in a 0.001% or N9.77 ($0.03) increase in rental value.Practical implicationsThe implication to real estate valuers is that varying premiums should be considered when valuing a property depending on the distance to the coastline while considering other housing attributes.Originality/valueThis research introduces a novel approach to the hedonic model for determining property values in proximity to coastal environment by estimating the influence of coastal amenities while controlling for other housing attributes influencing rent, on the one hand, and accounting for the interaction between coastal amenities/disamenities and other housing attributes influencing rent, on the other.