Presence of water in residential environments - value for money?

Abstract

The role of water in the locational bundle of residential value and choice determinants is multiple. Relevant attributes pertain to water quality, proximity and length of water frontage, view, size of water body, coastal development costs, and costs caused by flooding. They also pertain to different types of water: the sea, lake, river and so on. This is a systematic literature review of the influence of water proximity and use factors on property prices and area attractiveness within a spatial cost-benefit setting. According to the studies that were reviewed the composite effect for water quality, proximity and view generate a price premium up to ca 60% for seaside property, 25% for lakeside property, and up to 40% for a variety of other inland water bodies. In addition, few studies estimate the on-site potential for a coastal area with development restrictions as a net effect of the positive amenity benefits and negative opportunity costs to vary in the range from +21.5 to -14.5%. On balance these figures point to substantial benefits of water location. However, the price impact of flood risk was quantified separately as up to 22%, and may be deducted from these figures, given a localised tendency for such hazard. Thus, it may be concluded that for the attractiveness potential of a site the environmental externalities play a large role. Furthermore, when allocating housing claims spatially using an operational model where all land uses are covered extra costs to overcome conflict and scarcity situations may arise.