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Contingent Valuation: How Accurate is it when Valuing Impacts on Property Values?

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  • Judith Callanan

Abstract

Purpose - The purpose of this paper is to determine the accuracy of Contingent Valuation when assessing the value attached to the presence of a negative environmental impact, such as High Voltage Transmission Lines (HVOTLs)Design/methodology/approach - A case study was undertaken to:i.Carry out a quantitative analysis to determine the effect of the HVOTL on property values.ii.Determine the perceptions of property owners to the presence of the HVOTLs, andiii.Determine the property owners' 'willingness to pay' to have the HVOTLs removed, Findings - The results show a negative effect of 20% to those properties that are adjacent to the HVOTLs. This effect drops to a negligible amount at 100 metres. Owners believe there is a 10% effect whether they are adjacent or up to 400m from the HVOTLs. The majority of owners opposed any contribution towards removing the HVOTLs. A better understanding is required by Property Valuers, regarding how to appropriately measure the effect of HVOTLs on property values. Research Implications - The implication of this research is that Property Valuers need to change the way they take into account the presence of HVOTLs when valuing property, with more attention being taken to proximity. Three different approaches were taken to determine impact on property values, with each providing a different result. Originality/value - Results expand on current knowledge by demonstrating a disparity between what people say the value effect is, and what the actual effect is on their property value. Property owners showed a resistance against contributing towards removing the HVOTLs, although expressed their belief that their presence created a negative effect.

Suggested Citation

  • Judith Callanan, 2013. "Contingent Valuation: How Accurate is it when Valuing Impacts on Property Values?," ERES eres2013_75, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2013_75
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    References listed on IDEAS

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    1. Johansson,Per-Olov, 1987. "The Economic Theory and Measurement of Environmental Benefits," Cambridge Books, Cambridge University Press, number 9780521348102, September.
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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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