Planned residential community developments: do they add value?

Abstract

PurposeAn increasing trend in residential property markets is the concept of planned residential community developments, offering a range of services not available to the existing residential property markets in that given location. The purpose of this paper is to analyse a number of planned residential community developments in a major city to determine the demand for these developments and the impact they have in relation to price premiums and the overall residential property market.Design/methodology/approachThis study has identified four planned residential developments in the Sydney property market and all sale transactions in these developed estates or unit complexes have been analysed and compared to the sales transactions in the residential areas immediately adjoining the planned residential developments. These sales represent all sales transactions in the study areas and this database has enabled a comparison based on price trends, average annual capital return and price volatility.FindingsResults from this study have shown that residential property buyers are prepared to pay a premium for property in a planned residential community, despite the availability of cheaper housing within immediately adjoining locations, with this premium being maintained over time. The study also shows that buyers are prepared to purchase a property in a planned residential estate even though the adjoining areas are not considered to be as desirable, and in time the planned residential estate can increase the price of residential property in the adjoining areas.Research limitations/implicationsAlthough the sales data for two of the planned residential developments only covers the period 1999‐2004, this limitation is offset by the greater time period of sales transactions for the other two planned residential estates in the study. The limited sale period is due to the relatively new nature of these developments in Sydney, Australia.Originality/valueThe research has indicated that, in developed residential property markets, consumers will pay a premium for property that meets their lifestyle or security requirements, irrespective of the actual location of the development.