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

Linchuan Yang, K.W. Chau and Xu Wang

Research in Transportation Economics, 2019, vol. 76, issue C

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.

Keywords: Access to public services; Basic public service; Capitalization effect; Housing price; Hedonic pricing model; Spatial econometric model; Spatial dependence; Market segmentation (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (9)

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DOI: 10.1016/j.retrec.2019.06.001

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