Sotirios Thanos

Planning policy, housing density and consumer preferences

Due to a combination of government planning policies and market pressures in England in the period 2000–2008, there was an increase in the construction of flats and high-density developments and a decline in the construction of houses. In this paper, an analysis of the effects of these policy constraints is undertaken. Using hedonic pricing models, we test for a non-linear relationship between house prices and residential density in England. Consumers prefer houses over flats and detached properties over semi-detached and terraced (i.e. lower density suburban areas). However, both low-density, detached-dominant areas and high-density, flat-dominant areas attracted a premium over medium density areas and the relative size of these price differences vary between different housing market areas. In cities outside London, we consistently see a convex relationship between price and density, whereas a concave relationship between price and density is consistently observed in London. This suggests a different form of relationship between density and house prices in large urban conurbation areas, compared to more typical provincial cities. The conclusions we draw are that in the correct context, high density may be viewed positively but a single planning policy is not appropriate and it should be tailored to suit local market needs.

Expectation Adjustment in the Housing Market: Insights from the Scottish Auction System

This paper examines price expectation adjustment of house buyers and sellers to rapid changes in the housing market using data from Scotland where houses are sold through ‘first-price sealed-bid’ auctions. These auctions provide more information on market signals, incentives and the behaviour of market participants than private treaty sales. This paper therefore provides a theoretical framework for analysing revealed preference data generated from these auctions. We specifically focus on the analysis of the selling to asking price difference, the ‘bid-premium’. The bid-premium is shown to be affected by expectations of future price movements, market duration and high bidding frequency. The bid-premium reflects consumers expectations, adapting to market conditions more promptly than asking price setting behaviour and final sale prices. The volatile conditions of the recent housing market bubble are fully reflected in the bid-premium, whereas the asking and sale prices are much less prone to rapid movements.

Theoretically consistent temporal ordering specification in spatial hedonic pricing models applied to the valuation of aircraft noise

Incorporating spatial econometric tools in hedonic pricing (HP) models for environmental valuation has become the standard approach in the literature. The effect of house prices on other house prices is taken into account and usually measured by distance or contiguity in spatial weight matrices. Disaggregate house sale datasets are composed from observations each at a specific location and time. Nevertheless, the symmetric spatial weight matrices commonly employed in HP studies ignore the temporal dimension in disaggregate house sale data. Thus, not only are previous house sales taken to affect subsequent house prices, but so do future house sales. However, information does not travel backwards in time; hence, there is a clear theoretical impossibility of actual future prices affecting current/past prices. Estimates derived from HP models where spatial dependence is incorrectly specified or ignored will exhibit inaccuracies. This article proposes an alternative specification of spatial weights in HP that includes spatial effects on each sale price only from preceding house sales. The temporal aspect of spatial effects is then developed further by specifying a time-decay rate to capture the diminishing effect over time of preceding sale prices to succeeding house prices. This novel specification of spatial weight matrices is shown to have a significant effect on the estimates of house price depreciation from aircraft noise. Monetary values of aircraft noise externality are successfully derived from the HP models for Athens Airport.

Past price “memory” in the housing market: testing the performance of different spatio-temporal specifications.

ABSTRACT Recent methodological developments provide a way to incorporate the temporal dimension when accounting for spatial effects in hedonic pricing. Weight matrices should decompose the spatial effects into two distinct components: bidirectional contemporaneous spatial connections; and unidirectional spatio-temporal effects from past transactions. Our iterative estimation approach explicitly analyses the role of time in price determination. The results show that both spatio-temporal components should be included in model specification; past transaction information stops contributing to price determination after eight months; and limited temporal friction is exhibited within this period. These findings highlight the decidedly non-linear temporal patterns of such information effects.

Car Travel Demand: Spillovers and Asymmetric Price Effects in a Spatial Setting

A novel analysis framework for the spatial aspects of car travel, measured by vehicle miles traveled (VMT), is introduced in this paper. The specification of a dynamic spatial Durbin model enables the analysis of VMT spatial spillovers and diffusion between neighboring areas in the short and long run. The framework is further developed to capture and introduce to a spatial setting potential asymmetry and hysteresis that can reflect reference dependence and habits. A panel data set is compiled at the subregional level, based on official car mileage recordings in England and Wales. In addition to the inelastic long-run responses of VMT to fuel price (−0.124) and income (0.116) changes, the results illustrate asymmetries and hysteresis in price elasticities with a significant spatial component. The impact magnitude on VMT from a number of factors, such as alternative fuel use, fuel deserts in rural areas, and road network and car fleet characteristics, is also estimated. The results are consistent with the c...

What do hedonic studies of the costs of road traffic noise nuisance tell us

The value or cost of noise nuisance is important as it enables judgments to be made on the costs and benefits of interventions. This paper presents a review and meta-analysis of hedonic pricing (HP) studies of road traffic noise nuisance. Noise nuisance has commonly been valued using HP, a revealed preference approach based on the housing market, where house price is a function of a myriad of characteristics of the house and the surrounding area including noise. The value of noise obtained is expressed as the percentage change in house prices that results from a 1 decibel (dB) change in noise levels (Noise Depreciation Index, NDI). The approach is broadly accepted and underpins most values used in Government transport appraisals. However, the range of values is large, from 0.08 to 2.21 NDI according to the last review of the literature in 2001. This paper examines available studies to shed light on the variation in noise values, as well as new methodological developments, such as the widespread use of spa...

Domestic energy prepayment and fuel poverty: Induced self-selection of housing characteristics influencing the welfare of fuel-poor households

Prepayment meters are normally installed in the UK to address the risk of non-payment from overindebted households and the literature shows a discrepancy of higher energy prices in prepayment meters. This research seeks to understand the spatial aspect of this sorting process, where prepayment meters and higher energy prices are concentrated in the areas of higher fuel poverty. A corollary research question is whether this sorting affects aspects of the consumption of housing services with respect to structural and neighbourhood characteristic. State-of-the-art latent class discrete choice models (LCM) are employed on the choice of prepayment to standard payment meter. LCM approach identifies unobservable subgroups within the population and the housing stock, allowing better understanding the impact of exposure to patterns of multiple risks, as well as the antecedents and consequences of complex behaviours. Therefore, interventions can be tailored to target the subgroups that are affected most; in this case, households vulnerable to fuel poverty affected by market failures that lead to adverse self-selection.