Today we have a guest post from Auckland Council’s Dr David Bade and Dr Mario Fernandez, who have been looking into the question of whether heritage places have an effect on house prices in Auckland. Their research is part of the council’s Auckland Heritage Counts programme, which aims to raise awareness of the economic and social benefits of heritage.
Our research investigated whether Aucklanders are willing to pay more to own a house because it is scheduled as heritage, or is within a special character area. Scheduled historic heritage places are places protected for their heritage values (such as historical associations, architecture or social value), while Special Character Areas (SCAs) are groups of properties protected for their collective and cohesive values. Auckland Council’s Unitary Plan seeks to retain and manage the special values of a number of Special Character Areas, such as the Special Character Area in Ponsonby pictured here.
A hedonic price modelling technique was used to analyse residential property transactions in Auckland between 2006 and 2016. Put simply, this model assumes that the price of a house is determined by the characteristic of the property and surrounding environment (of which heritage/special character is but one factor).
Hedonic price modelling separates heritage/special character from other factors (such as the size of the house, its zoning, its suburb) to ensure that only the premium associated with heritage/special character is observed (and not the premium associated with other factors such as being a large house in a particular suburb).
In this study, over 300 other factors were accounted for in the model. These included: household characteristics (such as type of house, its zoning), distance to other amenities (such as schools, the city centre, beaches), the suburb and neighbourhood, and the month and year of sale.
The research found:
- There is a price premium of 5.3% for properties within the Council’s Special Character Areas (SCA) – they are sold for on average 5.3% more than properties outside of SCAs. That is around $50,000 more, using the average house price in Auckland.
- There is no price premium for scheduled historic heritage places i.e. there is no statistically significant positive or negative effect on the value of the property because it is scheduled. However, this finding also demonstrates that scheduling does not lower the value of a house in Auckland, something which sometimes concerns prospective owners of heritage places.
- The Special Character Areas price premium has held firm from 2006 to 2014 (even during the financial crisis of the late 2000s), but has dropped considerably since 2014. This is likely to relate to the period of rapid change in zoning rules in Auckland (particularly ‘upzoning’, which allowed more dense development of a property), and some negative publicity relating to heritage and special character, that has surrounded the introduction of the Auckland Unitary Plan (a process which began in 2013), but it is not possible to prove this at this stage.
- Property prices rise the closer you get to heritage places. There is a heritage “aura effect” of scheduled historic heritage places. Properties located within 50m of a scheduled heritage place have a price premium of 2.3% (That is around $21,000 more, using the average house price in Auckland). Properties within 100m of a scheduled property have a 1.6% premium (around $15,000 more, using the average house price in Auckland) i.e. people on average pay more to live close to a heritage place.
These findings show just how much value Aucklanders place on heritage and special character. People are willing to pay more to live close to pieces of history and to live in streets with special historic character.
Photos are of the Special Character Area in Ponsonby, images by David Bade.
About the authors:
Dr David Bade – Senior Specialist Built Heritage, Built & Cultural Heritage Policy Team, Heritage Unit, Auckland Council. Has worked in the Heritage Unit since 2013, with a (nearly) 2 year sabbatical working in the Social and Economic Research Team at Historic England (formerly English Heritage) in London (2015-2016). There, he worked on Heritage Counts, highly successful programme of heritage research and data collection.
Dr Mario Fernandez – Economist and Researcher at RIMU, Auckland Council. PhD in Agricultural Economics from Texas A&M University. Research interests: applied economics, agriculture and climate change, housing.