Environmental Amenities on the Housing Market in Warsaw: Hedonic Price Method Research

The paper reports on a 1999 survey of prices of family houses and apartments in the metropolitan area of Warsaw, Poland. A series of hedonic price models were estimated in order to determine whether the prices reflected such environmental amenities as green neighborhood, clean air or low noise. House or apartment characteristics (including prices) recorded by four local real estate agencies provided the core data base of the survey. All sites were visited in order to determine characteristics not registered by the agencies and yet presumed relevant for potential buyers or tenants. Additional data were obtained by consulting maps and statistics available from Warsaw environment and transport departments. The total sample consisted of 982 observations comprising 154 explanatory variables (75 house or apartment characteristics, 55 site characteristics, and 24 environmental attributes) and prices. The sample included 395 sales and 587 rentals. Preliminary statistical analyses proved that both subsamples were very heterogeneous and hence it was necessary to analyze house and apartment markets separately. Consequently the entire data set was divided into four parts: 166 house sales, 229 apartment sales, 147 house rentals, and 440 apartment rentals. Excessive numbers of explanatory variables and multicollinearity problems called for substantial aggregation of explanatory variables. Finally 4 hedonic price equations were arrived at. These confirmed that environmental attributes did explain price differentials. Nevertheless, it was observed that what typically mattered were perceived rather than actual attributes (such as visible high stacks rather than low stack pollution sources which are more important for the local air quality).