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The impact of high-rise condos on residential prices: An analysis for Nunoa (Santiago de Chile) Carlos, Marmolejo Duarte; Esteban, Skarmeta Cornejo & Carlos, Aguirre Nunez Centre for Land Policy and Valuations Polytechnic University of Catalonia XVI EUROPEAN REAL ESTATE SOCIETY CONGRESS Milan, Italy 23th, 26th of June 2010

Research question The impact of high-rise condos on residential prices

Research question Whether or not high-rise resindential condos impact on real estate prices of neighbouring housings? 4

El Case ruido study mensurado A borough in Santiago de Chile Metropolitan Area 16 sqkm 163.000 inhabitants Medium inconme population Not homogeneous income level Formerly single-family housing 2000-2003 59 high rise apartment built All of them redeveloping the land formerly occupied by single-family houses Up to 19 stories Up to 47.000 sqmeters 5

El Case ruido study mensurado Typical apartment building in Nunoa 6

Eldo Prostest of original settlers Again gentrification, and other externalities (e.g. shadow & congestion) 8

Hypothesis & theory The impact of high-rise condos on residential prices

Hypothesis High-rise apartment buildings, may produce negative externalities, but they do produce a positive impact on real estate prices of neighboring detached houses. 10

El Theoretical ruido mensurado framework Sabatini, Cáceres & Cerda (2001); Cáceres & Sabatini (2004), Salcedo & Torres (2004) 1. There is an improvement in the urban landscape, produced by the emergence of new high-quality buildings and the construction of new, but small, infrastructures around those new residential buildings (e.g. street pavement). Both factors do produce an externality, in the short run, with a positive impact on neighboring real estate prices. 2. The supply of dwellings orientated to medium-high income households produce an gentrification process, which may produce a revalorization process. 3. The increase of population density, produces an emergence of new services in the neighboring areas. 4. The construction of new buildings do impact on the perception of original settlers-owners, and their willingness to ask for their properties (to be redeveloped) increases. 11

Research agenda The impact of high-rise condos on residential prices

El Research ruido mensurado agenda 1. Does the impact depends on the size of the condominium? 2. Which is the spatial extend of the impact? 3. Is the impact stationary across all the municipal area of Nunoa? 13

Used methodology & data The impact of high-rise condos on residential prices

Methodology OLS Hedonic price model Ln( P) = B 0 + n n n n B V = v + B + = + s ss s B e= eee a= v v Ba A 1 1 1 1 a Structural Social Externalities Accesibility Geographical weighted regression Hedonic price model w ij 2 2 d ij = 1 si dij < h otherwise i hi = 0 Wij=ponderation factor Dij distance between each observation i and j point Hi distance of farest case j

Data (55 covariables) 1.185 sales of single-family houses (Property registry) Demographics Socioeconomics Economic activity premises Hosing quality National Census Land use and building potential (Master Plan) Residential condos features (Municipal buildings permits) Accesibility indexes (Transcad GIS)

Main results The impact of high-rise condos on residential prices

1. Does the impact depends on condominiums size? El ruido mensurado Modelos MCO MOD. 1a MOD. 1b R2 0,576 0,579 R2 corregida 0,574 0,576 Error típ. de la estimación 0,495 0,494 Covariable / factor B (no estandarizado) sig. Beta (estandarizado) B (no estandarizado) (Constante) 7,035-7,081 - sig. Beta (estandarizado) Superficie del predio 0,002 0,00 0,945 0,002 0,00 0,941 Cuadrado de la Superficie - 0,000 0,00-0,420-0,000 0,00-0,418 Factorial grupos menor NR (+) vs ma yor NR (-) - 0,148 0,00-0,191-0,147 0,00-0,190 Densidad construida en manzana 0,632 0,00 0,126 0,481 0,00 0,096 Dummy año de venta CU 2004 0,341 0,00 0,135 0,324 0,00 0,129 Lot size (+) Sq Lot size (-) Lower income population (-) Population density (+) Distancia (m) a colegios particulares Presencia de condominios verticales en buffer 300 Superficie de obra nueva (CV) buffer 300m -1,20E-04 0,00-0,068-1,20E-04 0,00-0,068 nd nd nd nd nd nd 6,13E-06 0,01 0,059 Dist. to private schools (+) Dummy presence of neighbouring condominiums ANOVA Modelo Regresión Suma de cuadrados df Media cuadrada Suma de cuadrados df Media cuadrada 392 6 65,41 394 7 56 Residuos 288 1.178 0,24 287 1.177 0 Total 681 1.184 681 1.184 NR= Nivel de renta Variable dependiente: Ln Valor de Venta de CU MCO calibrado por el método de pasos sucesivos F Sig. F Sig. 267 0 231 0,00 (n.s.) Built floor area of neighbouring condos (+)

2. Which is the spatial extend of the impact? 0,800 0,700 0,600 0,500 Sig. B 1,00E-05 8,00E-06 6,00E-06 B 0,400 4,00E-06 Sig. Single family house 0,300 2,00E-06 0,200 0,100 0,00E+00 0,000 100m 200m 300m 400m 500m Buffer -2,00E-06 Statial interdependence B Sig. new building area (HC) buffer 100m 8,4E-06 0,08 new building area (HC) buffer 200m 4,2E-06 0,19 new building area (HC) buffer 300m 2,4E-06 0,26 new building area (HC) buffer 400m -9,7E-07 0,53 new building area (HC) buffer 500m 4,1E-07 0,70 Dependent variable: Unstandardized residuals from model 1b without new building area (HC) buffer Source: Self elaboration, independent variable forced into the OLS model (enter) 19

3. Is the impact stationary across all the municipal area of Nunoa? Division of Nunoa in socioeconomic homogeneous areas using factor and cluster analysis 20

Final remarks The impact of high-rise condos on residential prices

Final remarks 1. Despite negative externalities, high-rise apartment buildings seems to produce a positive impact, in the short run, on real estate prices of neighboring houses 2. The impact do depends on condominium size, the bigger is the neighboring condo, the bigger is the positive impact. 3. The impact do deeply decrease with the distance. 4. The wealthiest areas in Nunoa, are the most benefited from high-rise building construction. So there is not a spatial convergence on real estate prices, but a divergence produced by a laissez faire urban policy 22

Thank you carlos.marmolejo@upc.edu Centre for Land Policy and Valuations Polytechnic University of Catalonia 23