Would environmental pollution affect home prices? An empirical study based on China’s key cities

Hao, Yu; Zheng, Shaoqing

doi:10.1007/s11356-017-0073-4

Research Article
Published: 13 September 2017

Would environmental pollution affect home prices? An empirical study based on China’s key cities

Yu Hao^1,2,3,4,5 &
Shaoqing Zheng^1,2

Environmental Science and Pollution Research volume 24, pages 24545–24561 (2017)Cite this article

478 Accesses
7 Citations
1 Altmetric
Metrics details

Abstract

With the development of China’s economy, the problem of environmental pollution has become increasingly more serious, affecting the sustained and healthy development of Chinese cities and the willingness of residents to invest in fixed assets. In this paper, a panel data set of 70 of China’s key cities from 2003 to 2014 is used to study the effect of environmental pollution on home prices in China’s key cities. In addition to the static panel data regression model, this paper uses the generalized method of moments (GMM) to control for the potential endogeneity and introduce the dynamics. To ensure the robustness of the research results, this paper uses four typical pollutants: per capita volume of SO₂ emissions, industrial soot (dust) emissions, industrial wastewater discharge, and industrial chemical oxygen demand discharge. The analysis shows that environmental pollution does have a negative impact on home prices, and the magnitude of this effect is dependent on the level of economic development. When GDP per capita increases, the size of the negative impact on home prices tends to reduce. Industrial soot (dust) has the greatest impact, and the impact of industrial wastewater is relatively small. It is also found that some other social and economic factors, including greening, public transport, citizen income, fiscal situation, loans, FDI, and population density, have positive effects on home prices, but the effect of employment on home prices is relatively weak.

This is a preview of subscription content, access via your institution.

Access options

Buy single article

Instant access to the full article PDF.

43,34 €

Price includes VAT (Finland)
Tax calculation will be finalised during checkout.

Notes

Issued at the end of August 2003, Circular of the State Council on Promoting the Continuous and Healthy Development of the Real Estate Markets clearly noted that the real estate industry with high correlation and strong driving force has become a pillar industry of the national economy. For more information, please refer to http://www.gov.cn/test/2005-06/30/content_11344.htm (in Chinese, accessed at 11/08/2017).
In May 2005, the General Office of the State Council issued a notice (Opinions on Doing a Good Job in Stabilizing Home Prices) to forward the Ministry of Construction and other six ministries. That notice required all regions and departments to solve some urgent problems such as excessive investment and surging price of the real estate, which was as an important task to strengthen macro-control at that time. For more information, one could refer to http://www.gov.cn/ztzl/2006-06/30/content_323680.htm. (in Chinese, accessed at 11/08/2017).
Issued by the General Office of the State Council at May 29, 2006, Opinions on Adjusting the Housing Supply Structure and Stabilizing Housing Prices, made quantitative provisions on the dwelling size, small unit’s ratio, the proportion of new homes down payment and so on. For more information, please refer to http://www.gov.cn/ztzl/2006-06/30/content_323678.htm (in Chinese, accessed at 11/08/2017).
Issued at April 17, 2010, Notice on Resolutely Curb Some Cities in the Home Prices Rose Quickly by the State Council, proposed to limit the purchase of different places, raising substantially the standards of granting mortgages for the purchase of the second apartment. For more information, one could refer to http://www.gov.cn/zhuanti/2015-06/13/content_2878981.htm (in Chinese, accessed at 11/08/2017).
For more information, please refer to http://www.nap.edu/catalog.php?record_id=11192 and http://www.chinadaily.com.cn/china/2007-11/19/content_6264621.htm (accessed at 11/08/2017).
The eastern region includes 12 provinces, autonomous regions and municipalities directly under the Central Government, which are Beijing, Tianjin, Hebei, Liaoning, Shandong, Jiangsu, Shanghai, Zhejiang, Fujian, Guangdong, Guangxi, and Hainan. Other provinces, autonomous regions and municipalities are classified in the non-eastern region.

References

Abraham JM, Hendershott PH (1994) Bubbles in metropolitan housing markets (no. w4774). Natl Bur Econ Res. https://doi.org/10.3386/w4774
Afonso A, Sousa RM (2012) The macroeconomic effects of fiscal policy. Appl Econ 44(34):4439–4454. https://doi.org/10.1080/00036846.2011.591732
Article Google Scholar
Arellano M, Bond S (1991) Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Rev Econ Stud 58(2):277–297. https://doi.org/10.2307/2297968
Article Google Scholar
Arellano M, Bover O (1995) Another look at the instrumental variable estimation of error-components models. J Econ 68(1):29–51. https://doi.org/10.1016/0304-4076(94)01642-D
Article Google Scholar
Blanchard OJ, Watson MW (1982) Bubbles, rational expectations and financial markets (no. w945). Natl Bur Econ Res. https://doi.org/10.3386/w0945
Blundell R, Bond S (1998) Initial conditions and moment restrictions in dynamic panel data models. J Econ 87(1):115–143. https://doi.org/10.1016/S0304-4076(98)00009-8
Article Google Scholar
Bramley G (1993) Land-use planning and the housing market in Britain: the impact on housebuilding and house prices. Environ Plan A 25(7):1021–1051. https://doi.org/10.1068/a251021
Article Google Scholar
Breedon FJ, Joyce MA (1993) House prices, arrears and possessions: a three equation model for the UK. Bank of England. https://doi.org/10.2139/ssrn.91408
Capozza DR, Hendershott PH, Mack C, Mayer CJ (2002) Determinants of real house price dynamics (no. w9262). Natl Bur Econ Res. https://doi.org/10.3386/w9262
Chen X, Funke M (2013) Real-time warning signs of emerging and collapsing Chinese house price bubbles. Natl Inst Econ Rev 223(1):R39–R48. https://doi.org/10.2139/ssrn.2175661
Article Google Scholar
Chen X, Shao S, Tian Z, Xie Z, Yin P (2017) Impacts of air pollution and its spatial spillover effect on public health based on China’s big data sample. J Clean Prod 142:915–925. https://doi.org/10.1016/j.jclepro.2016.02.119
CAS Article Google Scholar
Fan JL, Zhang YJ, Wang B (2017) The impact of urbanization on residential energy consumption in China: an aggregated and disaggregated analysis. Renew Sust Energ Rev 75:220–233. https://doi.org/10.1016/j.rser.2016.10.066
Article Google Scholar
Fortura P, Kushner J (1986) Canadian inter-city house price differentials. Real Estate Econ 14(4):525–536. https://doi.org/10.1111/1540-6229.00401
Article Google Scholar
Gimeno R, Martinez-Carrascal C (2010) The relationship between house prices and house purchase loans: the Spanish case. J Bank Financ 34(8):1849–1855. https://doi.org/10.1016/j.jbankfin.2009.12.011
Article Google Scholar
Glaeser EL, Gyourko J (2002) The impact of zoning on housing affordability (no. w8835). Natl Bur Econ Res. https://doi.org/10.3386/w8835
Green RK (1999) Land use regulation and the price of housing in a suburban Wisconsin County. J Hous Econ 8(2):144–159. https://doi.org/10.1006/jhec.1999.0243
Article Google Scholar
Grossman GM, Krueger AB (1994) Economic growth and the environment (no. w4634). Natl Bur Econ Res. https://doi.org/10.2307/2118443
Hwang M, Quigley JM (2006) Economic fundamentals in local housing markets: evidence from US metropolitan regions. J Reg Sci 46(3):425–453. https://doi.org/10.1111/j.1467-9787.2006.00480.x
Article Google Scholar
Jacobsen DH, Naug BE (2005) What drives house prices? Norges Bank Econ Bull 76(1):29–41
Google Scholar
Jud D, Winkler D (2002) The dynamics of metropolitan housing prices. J Real Estate Res 23(1–2):29–46. https://doi.org/10.5555/rees.23.1-2.363x90jp6p70pp26
Kim CW, Phipps TT, Anselin L (2003) Measuring the benefits of air quality improvement: a spatial hedonic approach. J Environ Econ Manag 45(1):24–39. https://doi.org/10.1016/S0095-0696(02)00013-X
Article Google Scholar
Kong F, Yin H, Nakagoshi N (2007) Using GIS and landscape metrics in the hedonic price modeling of the amenity value of urban green space: a case study in Jinan City, China. Landsc Urban Plan 79(3):240–252. https://doi.org/10.1016/j.landurbplan.2006.02.013
Article Google Scholar
Mankiw NG, Weil DN (1989) The baby boom, the baby bust, and the housing market. Reg Sci Urban Econ 19(2):235–258. https://doi.org/10.1016/0166-0462(89)90005-7
CAS Article Google Scholar
Martinez Pagés J, Maza LÁ (2003) Analysis of house prices in Spain (no. 0307). Banco de España
McMillen DP, McDonald J (2004) Reaction of house prices to a new rapid transit line: Chicago’s midway line, 1983–1999. Real Estate Econ 32(3):463–486. https://doi.org/10.1111/j.1080-8620.2004.00099.x
Article Google Scholar
Rappaport J (2008) Consumption amenities and city population density. Reg Sci Urban Econ 38(6):533–552. https://doi.org/10.1016/j.regsciurbeco.2008.02.001
Article Google Scholar
Reichert AK (1990) The impact of interest rates, income, and employment upon regional housing prices. J Real Estate Financ Econ 3(4):373–391. https://doi.org/10.1007/BF00178859
Article Google Scholar
Ren Y, Xiong C, Yuan Y (2012) House price bubbles in China. China Econ Rev 23(4):786–800. https://doi.org/10.1016/j.chieco.2012.04.001
Article Google Scholar
Rosen S (1979) Wage-based indexes of urban quality of life. Current Issues in Urban Econ 3:324–345
Google Scholar
Shen L (2012) Are house prices too high in China? China Econ Rev 23(4):1206–1210. https://doi.org/10.1016/j.chieco.2012.03.008
Article Google Scholar
Wang D, Li SM (2006) Socio-economic differentials and stated housing preferences in Guangzhou, China. Habitat Int 30(2):305–326. https://doi.org/10.1016/j.habitatint.2004.02.009
CAS Article Google Scholar
Wooldridge JM (2016) Introductory econometrics: a modern approach (6e). South-Western Cengage Learning, USA, Mason
Wu G, Miao Z, Shao S, Jiang K, Geng Y, Li D, Liu H (2016) Evaluating the construction efficiencies of urban wastewater transportation and treatment capacity: evidence from 70 megacities in China. Resour Conserv Recycl (in press). doi:https://doi.org/10.1016/j.resconrec.2016.08.020
Yu H (2010) China’s house price: affected by economic fundamentals or real estate policy? Front Econ China 5(1):25–51. https://doi.org/10.1007/s11459-010-0002-7
Article Google Scholar
Zhang YJ, Bian XJ, Tan W, Song J (2015) The indirect energy consumption and CO₂ emission caused by household consumption in China: an analysis based on the input–output method. J Clean Prod 163:69–83. https://doi.org/10.1016/j.jclepro.2015.08.044
CAS Article Google Scholar
Zhang YJ, Peng YL, Ma CQ, Shen B (2017) Can environmental innovation facilitate carbon emissions reduction? Evidence from China. Energy Policy 100:18–28. https://doi.org/10.1016/j.enpol.2016.10.005
Article Google Scholar
Zheng S, Cao J, Kahn ME, Sun C (2014) Real estate valuation and cross-boundary air pollution externalities: evidence from Chinese cities. J Real Estate Financ Econ 48(3):398–414. https://doi.org/10.1007/s11146-013-9405-4
Article Google Scholar
Zheng S, Kahn ME, Liu H (2010) Towards a system of open cities in China: home prices, FDI flows and air quality in 35 major cities. Reg Sci Urban Econ 40(1):1–10. https://doi.org/10.1016/j.regsciurbeco.2009.10.003
Article Google Scholar

Download references

Acknowledgements

The authors appreciate the help of Prof. Sebastian Wandelt and Associate-Prof. Xiaoqian Sun at Beihang University to assist us in conducting some empirical estimations. The authors are also very grateful to four anonymous reviewers and Editor-in-Chief Prof. Dr. Jiri Philippe Garrigues for their insightful comments that help us sufficiently improve the quality of this paper. The usual disclaimer applies.

Funding

The authors acknowledge financial support from the National Natural Science Foundation of China (71403015, 71521002), the Beijing Municipal Natural Science Foundation (9162013), the National Key Research and Development Program of China (2016YFA0602801, 2016YFA0602603), and the Joint Development Program of Beijing Municipal Commission of Education.

Author information

Affiliations

Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing, 100081, China
Yu Hao & Shaoqing Zheng
School of Management and Economics, Beijing Institute of Technology, Beijing, 100081, China
Yu Hao & Shaoqing Zheng
Collaborative Innovation Center of Electric Vehicles in Beijing, Beijing, 100081, China
Yu Hao
Sustainable Development Research Institute for Economy and Society of Beijing, Beijing, 100081, China
Yu Hao
Beijing Key Laboratory of Energy Economics and Environmental Management, Beijing, 100081, China
Yu Hao

Authors

Yu Hao
View author publications
You can also search for this author in PubMed Google Scholar
Shaoqing Zheng
View author publications
You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Yu Hao.

Additional information

Responsible editor: Philippe Garrigues

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Hao, Y., Zheng, S. Would environmental pollution affect home prices? An empirical study based on China’s key cities. Environ Sci Pollut Res 24, 24545–24561 (2017). https://doi.org/10.1007/s11356-017-0073-4

Download citation

Received: 08 July 2017
Accepted: 01 September 2017
Published: 13 September 2017
Issue Date: November 2017
DOI: https://doi.org/10.1007/s11356-017-0073-4

Keywords

China’s key cities
Home prices
Environmental pollution
Generalized method of moments (GMM)