Efficient Land Use with Congestion: Determining Land Values from Residential Rents

Roland Fuess and Jan Koller
Authors registered in the RePEc Author Service: Roland Füss ()

ERES from European Real Estate Society (ERES)

Abstract: In this paper, we propose a model of the residential rental market that meets the functional requirements of the underlying land market. A crucial aspect in the model is the incorporation of land quality represented by the floor area ratio (FAR),one of the most important land use regulation measures. Embedded in a hedonic setting, the model is tested empirically using apartment rent data from the canton of Zurich in Switzerland. From our empirical results we derive two main reasons for a monocentric structure of land prices. First, the central location's attractiveness makes land prices more expensive. Second, on a regulatory basis, the FAR works as a multiplier for land prices. Because the FAR is high in central areas, land prices are inflated accordingly. As a by-product of the model test, we find a capitalization rate for land of 8.1%.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2016-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2016_303

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