The Effects Of Demolition Control Precincts On Property Values

Peter Elliott, Clive Warren and Jason Staines

ERES from European Real Estate Society (ERES)

Abstract: As municipal governments continue to implement historic preservation regulations, it is vitally important to understand the effects on the designated properties and the housing market. Determining and understanding the impact is important for property owners, buyers, planning authorities and valuers.Whilst it is known that historic preservation designation has an effect on property value, the effects are mixed and unclear. The direction and magnitude of the effect is dependent on locational factors, regulatory, structural, and housing market variables. Literature has extensively examined the effects that historic preservation designation has on the value of residential property in Europe and the United States. This is the first study conducted in Australia that investigates the economic effects of Demolition Control Precincts (DCPs). This research examines the housing market.The theoretical model draws upon urban planning theory and housing economics in the context of an Australian housing market, the City of Brisbane. It was hypothesised that, DCPs reduce the supply of residential vacant land, causing a degree of scarcity. The demand for residential vacant land in DCPs is inelastic, creating market segmentation. It was hypothesised that this segmentation results in residential vacant land in DCPs selling for a premium over comparable vacant land not located in DCPs.Results from hedonic price regression models validate the research model and provide several insights. Key findings are that BrisbaneÕs residential vacant land market is segmented, due to a scarcity of vacant land in DCPs. Vacant land within DCPs exhibits inelasticity of demand. Vacant land located in DCPs sell for a price premium of 11 percent, over comparable vacant land located outside of a DCP. Consistent results are found across all locations of Brisbane, including inner and outer suburbs. The thesis has procedural and substantive policy implications. Planning authorities must find an appropriate balance between historical preservation and urban development. Property valuation of residential vacant land and houses requires recognition of housing market segmentation and price premia.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2015-07-01
New Economics Papers: this item is included in nep-ure
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