Does comprehensive redevelopment change the housing price gradient? A case study in Mongkok, Hong Kong

Headnote

Urban decay is an inevitable outcome of the growth of most cities, including Hong Kong. Many old buildings in Hong Kong are dilapidated, and it is urgent to tackle urban decay in the city. Redeveloping dilapidated buildings has long been regarded as an effective solution to this urban problem. Yet, as suggested in the literature, redevelopment may be responsible for gentrifying neighbourhoods because it pushes up property and rental prices near redeveloped sites. However, there are still few empirical studies on how comprehensive redevelopment affects housing values in a neighbourhood. In this light, this study investigates the impacts of the Urban Renewal Authority's Argyle Street / Shanghai Street Redevelopment Project on the transaction prices of nearby housing. A set of panel data is employed and the change in the spatial price gradient before and after the redevelopment project is explored. The findings suggest that proximity to the project site had a significant positive impact on housing prices before the project. However, no change was seen in the spatial-price gradient after completion of the project. These results confirm the findings of a previous study that housing prices do not respond to the change in the environmental quality resulting from comprehensive redevelopment.

Keywords: housing price, comprehensive redevelopment, gentrification, externality, hedonic price analysis, Hong Kong

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1 Introduction

While a city grows, it is natural for the urban environment to decay (Khaki et al., 1999). People in Hong Kong have been enjoying the fruits of rapid economic growth in the past few decades, but at the same time are suffering from the long-term problem of urban decay. About one-quarter of the 39,000 private buildings in the city are dilapidated to various degrees (Housing, Planning and Lands Bureau, 2005). A wave of building dilapidation sooner or later results in urban decay, which has been a major eyesore in many well-developed cities (De Kleijn, 1986; Andersen, 1995). In light of the negative externalities brought about by building dilapidation (e.g., public health and safety hazards), urban renewal or regeneration is thus required to tackle the problem. Urban renewal or regeneration refers to the process in which deteriorated or functionally obsolete buildings are improved through various methods such as comprehensive redevelopment, rehabilitation and modernisation (Dumouchel, 1975). Among...