The Effects of Urban Redevelopment on Neighbourhood Housing Prices

Abstract

The topic of neighbourhood improvement is central to residential appraisal. The study empirically investigates how the redevelopment affects the housing values in the vicinity. Using price gradient approach based on hedonic pricing model, we study the effects of an urban redevelopment project on housing property prices during the pre-redevelopment stage, construction stage and post-redevelopment stage. The results show that there were significant increases in property prices between before implementation and after completion of the redevelopment project. Property value enhancements well ahead of the actual project completion are also observed. It suggests that redevelopment has brought overall improvements to the surrounding properties and the expectation of these advantages was taken into consideration in the pricing of the properties during the construction phase. In addition, the changes in housing price gradients reveal that the effects of redevelopment varied with proximity between the properties and the redeveloped site. Properties which have the closest proximity with the redevelopment are found to have experienced greater increase in price after redevelopment but less extent of price rise during construction. It is important for urban planners to carefully consider the externalities of redevelopment received by properties in different locations, in order to maximize the positive impacts of redevelopment on the neighbourhood.