Canterbury, New Zealand, experienced two significant earthquakes in 2010 and 2011 with a devastating impact on both houses and land. Negative media attention to the potential…
Abstract
Purpose
Canterbury, New Zealand, experienced two significant earthquakes in 2010 and 2011 with a devastating impact on both houses and land. Negative media attention to the potential financial risks of living near or on the new Technical Category 3 (TC3) land or on land in a flood zone has fuelled the perception of uncertainty over the negative property price impacts. This research aims to determine if residents’ perceptions of the risks associated with various types of land zones (e.g. TC1, TC2 and TC3) are reflected in property prices.
Design/methodology/approach
This research analyses sale price patterns and the relationship between sale prices and house characteristics before and after both earthquakes. A three-step approach was taken by applying: an average trend analysis, Geographic Information Systems’ (GIS) hotspot analysis to identify possible spatial differentiations between the before and after-effects of the earthquakes and hedonic modelling to quantify the effect of house characteristics on sale price while controlling for and comparing three land zones (TC1 to TC3).
Findings
The data suggest that average sale prices increased after both quakes in TC1 and TC2 in contrast to TC3 zones, while close to 8,000 structures were demolished in red zones from 2010-2013 (supply was reduced). The econometric modelling suggests that higher sale prices are achieved by: newer houses across all land zones and more recent sale agreements only in TC1 and TC2 zones. Other observations include the effect of certain exterior façade materials on sale prices on the overall data set and in the individual TC1 and TC3 zones. In conclusion, the results suggest that although caution might exist for the TC3 zone, the quality of the house can override the stigma attached to the TC3 zones.
Research limitations/implications
A confounding factor in the research was that approximately 7,800 homes were rezoned red and/or demolished between 2010 and 2013 changing the supply and demand balance. Further, banks and other lenders updated their requirements for new lending on properties in the Canterbury region, requiring a number of reports from professionals such as structural engineers, geotechnical engineers and valuers before any new lending would be approved. Additionally, immediately after the September and February earthquakes, there was a 21-day stand-down period for earthquake-cover in Canterbury and without adequate insurance cover banks would not advance mortgage money, causing a short-term slowdown in the residential property market.
Practical/implications
The outcomes of this research will be of interest to government agencies tasked with assessing compensation for affected property owners. For example, the Earthquake Commission (EQC) developed a Diminution of Value Methodology for Increased Flooding Vulnerability that formed the basis of a High Court declaratory judgment decision in December 2014 that cleared the way for the EQC to start settling properties with increased flooding vulnerability. The EQC methodology was informed by the results of similar studies to this one, from around the world. Homeowners and rating valuers will also be interested in the results to understand how house prices have been affected by market perceptions towards earthquake damage, particularly in the worst-affected areas.
Originality/value
This study fills a research void regarding the price impacts of residents’ perceptions of the risks associated with various types of land zones that reflect the expected future liquefaction performance of the land.
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The “stigma” associated with remediated contaminated land is the blighting effect on property value caused by perceived risk and uncertainty. Uncertainties relate to negative…
Abstract
The “stigma” associated with remediated contaminated land is the blighting effect on property value caused by perceived risk and uncertainty. Uncertainties relate to negative intangible factors such as the inability to effect a total “cure”, the risk of failure of the remediation method, the risk of changes in legislation or remediation standards, the difficulty in obtaining finance, or simply a fear of the unknown. Post‐remediation “stigma” is the residual loss in value after all costs of remediation, including insurance and monitoring, have been allowed for. It equates to the difference in value between a remediated contaminated site and a comparable “clean” site with no history of contamination. The initial results from a study of the market sales data of post‐remediated vacant residential land along the Swan River, in Perth, Western Australia, from 1992‐1998 are summarized. The aim of this ongoing research is to estimate the amount of “stigma” arising from a site’s contamination history and measure the effect of this on residential property values of remediated property. The results show that while a site’s contamination history impacts negatively on property prices, the price decreases are offset by the positive influence on price from additional amenities provided in the case study neighbourhood.
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Sandy Bond and Peter Dent
Research undertaken by the authors over the last two years has revealed a number of problems in valuing non‐market, non‐investment properties in the public sector. The first part…
Abstract
Research undertaken by the authors over the last two years has revealed a number of problems in valuing non‐market, non‐investment properties in the public sector. The first part of the article draws together some of the literature in the area of public sector asset valuation and management. This is intended, first, to highlight current thinking about the issues involved in the valuation exercise, second, to focus on some of the unresolved aspects and, finally, to suggest areas for further consideration to help resolve these.The second part of the article provides an introduction to, and critical examination of, the valuation methodology commonly used to value specialised property assets. Possible alternative approaches are suggested, which may better enable authorities to assess the performance of their assets and integrate these into the management processes.
Assesses the methods which can be used to value non‐market propertyassets in the light of increased demands for such valuations in a timeof movement towards greater public…
Abstract
Assesses the methods which can be used to value non‐market property assets in the light of increased demands for such valuations in a time of movement towards greater public accountability. Discusses the inadequacy of current methods of valuation which assume that the property is used for financial gain when no established supply and demand market exists for public property assets. Concludes that a valuation should reflect environmental as well as economic efficiency of buildings.
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Sandy G. Bond and Paul J. Kennedy
Increasing litigation involving land contamination and an escalation in the number of incidents where property owners have suffered financial losses from these cases has resulted…
Abstract
Increasing litigation involving land contamination and an escalation in the number of incidents where property owners have suffered financial losses from these cases has resulted in negative impacts on property values and greater risks associated with investments in contaminated property. To date, there has been little systematic research on the valuation methodology that accounts for these risks. To help address this, two similar surveys were undertaken within New Zealand (NZ) and the United Kingdom (UK), the results of which are summarised here. The survey instruments were designed to determine what the respondents are currently doing when providing advice or producing valuations to account for the financial risks associated with investing in contaminated properties. It is hoped that the survey results will aid the process of developing “best practice” methodologies for use by valuers.
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Sandy Bond, William N. Kinnard, Elaine M. Worzala and Steven D. Kapplin
While numerous studies have been carried out in the US to determine the character and scope of the effects of contaminated, threatened or “stigmatized” properties on the terms and…
Abstract
While numerous studies have been carried out in the US to determine the character and scope of the effects of contaminated, threatened or “stigmatized” properties on the terms and availability of debt financing, little appears in the published literature dealing with the attitudes, policies and requirements of equity investors. Hence, the extent of opposition from both institutional lenders and equity investors toward contaminated property is still uncertain. This paper summarises the results of parallel studies undertaken within New Zealand (NZ) and the USA to answer the question of how those who lend on, and invest in, property affected or impacted by contamination perceive the risks associated with this type of investment and evaluate its impacts. Of particular interest are the perceived effects of on‐site contamination on property investment and its financing.
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To determine if the ancient Chinese tradition of Feng Shui affects residential property prices in a Western setting (“Western” and “the West” refers to the cultures and peoples of…
Abstract
Purpose
To determine if the ancient Chinese tradition of Feng Shui affects residential property prices in a Western setting (“Western” and “the West” refers to the cultures and peoples of the mainlands Europe, the Americas, Australia, and New Zealand.)
Design/methodology/approach
Two approaches were adopted to measure the impact of Feng Shui design principles on property prices. First, a case study approach using a paired sales analysis was adopted to compare sales transaction prices of Feng Shui designed condominiums with sales prices of condominiums that were built without this design feature. Second, sales transaction data were analysed using multiple regression analysis in a hedonic pricing framework.
Findings
The results were mixed but provide preliminary evidence that Feng Shui impacts positively on property prices in the West.
Research limitations/implications
Firstly, the units were sold as “designer ready”. Prices for these units exclude floor coverings, painting, kitchen and bathroom fittings, appliances, counter tops and plumbing fixtures. A more precise adjustment was not able to be made as the actual build‐out cost for each unit was not available. However, it was felt that the average rate was a reasonable proxy for the cost of a build‐out. Secondly, the case study includes sales of Feng Shui designed units in only one building. A more reliable result would have been achieved had the data set included several buildings constructed using the principles of Feng Shui.
Practical implications
With the rise in popularity of the use of Feng Shui design in Western homes, understanding the effects of this on property values is important to both property valuers and investors of such property.
Originality/value
Research on the impact of cultural beliefs on residential property values in the West is limited. This paper provides a contribution to understanding the value affects of such beliefs, specifically those relating to Feng Shui.
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Over the past two years, the use of rental inducements has increased inresponse to a softening leasing market for office space. The methods toemploy for analysing the induced…
Abstract
Over the past two years, the use of rental inducements has increased in response to a softening leasing market for office space. The methods to employ for analysing the induced rentals have been uncertain. However, owing to a number of recently contested arbitrations, methodologies are now being applied which are gaining general acceptance. Despite this, not all of the issues have gained total unanimity and require further analysis. These include: (1) the treatment of tax; (2) the treatment of the benefit arising from an unratched lease; and (3) the quanitifying of indirect inducements. The resolution of these issues is essential to achieve a fully equitable rental assessment. These issues are discussed and methodologies suggested to address them. In future the need to deal with such issues may subside as a result of the growing trend towards lower stated rentals and away from the use of inducements.
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This paper aims to investigate residents’ perceptions of risk towards owning and living in residential property in Christchurch subsequent to the 2010 and 2011 Canterbury…
Abstract
Purpose
This paper aims to investigate residents’ perceptions of risk towards owning and living in residential property in Christchurch subsequent to the 2010 and 2011 Canterbury earthquakes to identify how these perceptions impact on the price residents are willing to pay for affected property. Such market behaviour can motivate homeowners to adopt risk mitigation measures.
Design/methodology/approach
An online survey was developed and the Web link distributed to Canterbury residents via the media. This method of distribution was adopted, as a postal survey was not possible due to the number of homes that had been destroyed by the earthquakes and the highly transient nature of the community as a result.
Findings
The results indicate that with the recent earthquake experience, residents are demonstrating risk mitigation behaviours through an aversion to investing in properties affected by, or with a risk of, liquefaction. Specifically, the majority of respondents had strong reservations about buying Technical Category 3 property, and would be prepared to pay 20 per cent (or > 20 per cent) less for it, indicating some stigma towards affected property. Further, most respondents would now prefer the construction of their home to be of a type that fared better in the earthquakes: lightweight, single-storey, with a concrete slab foundation. These housing preferences will likely drive the market towards the adoption of risk mitigation measures in the retrofit of existing homes as well as in the design and construction of new homes.
Research limitations/implications
Due to the number of homes that had been destroyed by the earthquakes and the highly transient nature of the community as a result, probability sampling was not possible. This, together with the low response rate, means that the respondents surveyed may not be representative of the Christchurch population.
Practical implications
The outcomes of this research will be of interest not only to homeowners wanting to know how their home’s value has been impacted by market perceptions towards earthquake and liquefaction damage, particularly in the worst-affected areas, but also the rating valuers tasked with assessing property values for rating purposes. Property developers and builders involved in the repair of existing homes and construction of new homes will also want to know current market preferences. Government bodies will find the results informative of how the media has, and can be used, to motivate market behaviour towards risk mitigation, particularly in regard to “material risk” (as described in Solberg et al., 2010), that is risk from a scientific and technical viewpoint of probability of future risk, and as related to what has become known about these risks in terms of building structure, height, age, soil type/land categories and flood zones. Further, the results provide a gauge of how the community perceived the handling of the recovery process, so that the weaknesses highlighted can be addressed, which will help restore community trust.
Originality/value
This study fills a research void on the impact of residents’ perceptions of risk towards home ownership in a city impacted by significant earthquakes and resulting liquefaction.
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Improving energy efficiency of buildings and appliances has been shown to be the most cost‐effective way of reducing greenhouse gas emissions. The aim of this research is to…
Abstract
Purpose
Improving energy efficiency of buildings and appliances has been shown to be the most cost‐effective way of reducing greenhouse gas emissions. The aim of this research is to identify householders' lifestyle choices within homes that impact on energy use and their motivation to conserve energy. The results help to identify methods to increase the uptake of sustainability practices that will reduce greenhouse gas emissions in residential buildings.
Design/methodology/approach
A postal survey was adopted as the quickest and most cost‐effective way of surveying a large sample of householders across Australia. The survey was sent to 2,500 randomly selected residents, 500 in each of the five largest Australian cities by population.
Findings
The results identified that barriers to energy efficiency in households include: larger homes and smaller households; initial costs of sustainable features, and a lack of consumer information about benefits and savings from incorporating energy‐efficient devices. The most common reason why people are not acting in more sustainable ways is inconvenience or laziness.
Research limitations/implications
The response rate was very low and retired persons were over‐represented, as they are the people with more time to answer surveys. Further research is warranted to achieve a larger, more representative sample.
Practical implications
These results will be useful to Government policy makers as they help to identify methods to increase the uptake of sustainable features and energy conservation in homes.
Originality/value
This study is the first attempt at a nation‐wide study of residential behavior to help reduce greenhouse gas emissions in homes.