A multi-scale exploration of the relationship between spatial network configuration and housing prices using the hedonic price approach. A Greater London case study Stephen Law The Bartlett School of Architecture UCL Submitted for the degree of Doctor of Philosophy September 2017 1 Copyrights I, Wai Pan Stephen Law confirm that the work presented in this thesis is my own. Where information has been derived from other sources, I confirm that this has been indicated in the thesis. Signature…………………………………… Copyright © Stephen Law 2017 2 All the Ordnance Survey map data that has been used and reproduced in this thesis are covered under the following copyright information: © Crown Copyright and database right 2017. An Ordnance Survey/EDINA supplied service. All the Census data that has been used and reproduced in this thesis are covered under the following copyright information: National Statistics data © Crown copyright and database right 2017 All the house price data that has been used and reproduced in this thesis are covered under the following copyright information: Land Registry © Crown copyright and database 2017 All the land use data that has been used and reproduced in this thesis are covered under the following copyright information: Valuation Office Agency under the Open Government License v1.0 © Crown copyright 2017 All the Nationwide transaction data was provided by Nationwide through a licensing agreement with London School of Economics (LSE). © Nationwide Building Society 3 I dedicate this thesis to Kelin, my fiancé for your unconditional love, for your patience and for your intelligence. 4 Acknowledgements I am whole-heartedly thankful to my two supervisors, Professor Alan Penn and Dr Kayvan Karimi, for their encouragement, their guidance and their supervision which enabled me to complete my thesis. I am also thankful to Professor Laura Vaughan, Professor Bill Hillier and the many colleagues and friends at the UCL Bartlett Space Syntax Laboratory, past and present, whom motivated me and inspired me. I would also like to give my special thanks to Space Syntax Limited and the many colleagues and friends there, past and present: Tim, Anna, Max, Christian, Nora, Antonin, Ji, Fefe, Ed, Godfrey, Laurens, Ioanna, Abhi, Raman, Kaveh and Su. Thank you all for your patience and the intellectual capacity to pursue both a professional and academic career simultaneously. I sincerely thank Professor Stephen Gibbons at LSE for his advices on the econometrics, to Dr. Jorge Gil for your encouragement and advice specially on chapter 6, to Professor Lars Marcus for his interest in my work, to Dr. Alain Chiaradia for giving me guidance throughout the thesis, to Dr. Yao Shen for walking this PhD journey together with me and to the many others whom have helped me a great deal in the past five years. Finally, I would like to thank my father, my mother, my sisters whom I am incredibly grateful for their support and their unconditional love throughout this process. 5 Abstract Using the hedonic price approach, the prices of heterogeneous goods such as housing can be derived from the sum of the item’s utility-bearing parts. Since its introduction, the approach has become an established real estate method for valuing intangible goods. Despite the well-known impacts of amenity and access on house prices, limited attention has been given to the impacts of the urban built form on property values. This stems partly from the fact that few quantitative methods exist that can provide a thorough understanding of the built environment. Through three interrelated strands of empirical research, this research proposes using spatial configuration methods and the hedonic price approach as an empirical strategy for enhancing the analysis and interpretation of the housing market in the densely populated region of Greater London. The first strand of the argument focuses on the correlation between accessibility and house prices. Existing results show a strong relationship between geographic accessibility , such as Distance to the Central Business District and house prices. There are, however, two problems with this approach. First, geographical measures assume a predetermined employment location; second, is that such measures often fail to consider the network effects on house prices. This study reveals that spatial network centrality and geographical measures are jointly significant in explaining house prices. The second strand of the argument focuses on the relationship between the local area and house prices. In the past, census output areas were used for measuring this relationship. In reality, however, utilising these arbitrary definitions has led to inconsistent results. In contrast, the proposed study takes a Street-based Local Area (St-LA)” approach, which can more accurately captures the subtle differences in the urban environment. In response to the common problem of using census output areas as building blocks for defining housing submarkets, the third strand of this research shows that housing submarkets can be described more accurately using the St-LA approach through the application of a hedonic price model. The results demonstrate that spatial configuration factors are significant when correlated with house prices at different scales. This research links the results of the three areas of investigation in order to provide a more comprehensive understanding of the economic performance of the built form and to encourage planners, decision-makers and developers in using spatial configuration-based methods in planning and design that can lead to more equitable and sustainable policy making. 6 Table of Contents Chapter 1 Introduction ........................................................................................................................ 18 1.1 Background ................................................................................................................................. 18 1.1.1 Urban Rent Theory ................................................................................................................... 19 1.1.2 Space Syntax Theory ............................................................................................................... 20 1.1.3 Hedonic Price Model as the Empirical Approach ..................................................................... 21 1.1.4 Greater London Case Study .................................................................................................... 22 1.2 Empirical Strategy ....................................................................................................................... 22 1.2.1 Accessibility .............................................................................................................................. 23 1.2.2 Local Area ................................................................................................................................ 24 1.2.3 Housing Submarkets ................................................................................................................ 24 1.3 Thesis Outline ............................................................................................................................. 25 1.3.1 Summary .................................................................................................................................. 27 Chapter 2 Review of the Hedonic Price Model ................................................................................. 28 2.1 Background ................................................................................................................................. 28 2.2 Key Theoretical Concepts ........................................................................................................... 30 2.2.1 Spatial Equilibrium and the Monocentric Bid Rent Model ........................................................ 30 2.2.2 Hedonic Price Theory and Intra-city House Price Model ......................................................... 31 2.2.3 The Housing Submarket Theory .............................................................................................. 32 2.2.4 The Rosen-Roback Inter-regional Model ................................................................................. 32 2.2.5 The Limitations of the Hedonic Price Model ............................................................................ 33 2.3 The Empirical Approach of the Hedonic Price Model ................................................................. 34 2.3.1 The Dependent Variable: House Prices................................................................................... 35 2.3.2 The Independent Variable Set ................................................................................................. 36 2.3.3 Structural variable .................................................................................................................... 37 2.3.3.1 Structural variable limitation .................................................................................................. 37 2.3.4 Location Variables .................................................................................................................... 38 2.3.4.1 Access to Employment ......................................................................................................... 38 2.3.4.2 Access to Public Transport ................................................................................................... 38 2.3.4.3 Access to Private Transport .................................................................................................