Measuring spatial heterogeneity of air quality on apartment transaction prices in Seoul, South Korea

Abstract

Air quality is one of the largest environmental risks for people in urban areas. Therefore, research on the economic value of air quality is necessary to reduce adverse impacts from air pollution on public health and economy for achieving sustainable cities. One of the main objectives of this research was to analyze spatial variability of air quality and spatial distribution of apartment transactions in Seoul, South Korea between January 2018 and June 2020. A second aim was to conduct spatial econometrics to determine the impacts of air quality on housing prices by proposing a spatial lag model to estimate exogeneous spatial autocorrelation of air quality in adjacent areas. Transaction data from 17,000 apartments between January 2018 and June 2020 provided strong evidence for the existence of significant effects of air quality on housing prices. As expected, all three air quality measurements, levels of PM₁₀, PM_2.5 and Comprehensive Air-quality Index (CAI), showed a negative correlation with housing transaction prices, suggesting worsening air quality leads apartments in such areas to be transacted at a discount. Moreover, the spatial model showed a strong spatial dependence between air quality in a given region and neighboring regions, and such effects led to a decrease in the price effect of air quality. Under conditions of poor air quality and its impacts on human health, demands for clean air in dense urban areas when purchasing an apartment unit are increasing especially in the post-COVID era. The results of this study can help urban planners and developers determine guidelines and spatial strategies for sustainable cities.