Optimal Height Of Land Development – An Economic Perspective
Abstract Sky-scrapers are rising in the panorama of big modern cities more and more often, becoming a symbol of dynamic growth and prestige. High-rise development appears to be an answer to the expanding demand for new residential and commercial space as urban land prices continue to go up and the availability of land decreases. This article aims to identify factors affecting the choice of optimal building height in the context of economic effectiveness. It also presents factors that determine the implementation of high-rise development projects. Given the complexity of this subject matter, emphasis is placed on its economic dimension.
Determining Optimal Building Height
The paper examines how building height is determined in the absence of building height regulatory restrictions. A model is developed for determining optimal height using simple neo-classical economic analysis; this is then tested using empirical data from Hong Kong. The results show that the observed building heights are consistent with the optimal height predicted by the model. In addition, it was also found that the point of optimality varied positively with the quality of the external environment. An important practical implication is that town planners and policy-makers can make use of the model as a benchmarking tool to assess and quantify the effect of imposing or relaxing height restrictions.
Impact of Political Incidents, Financial Crises, and Severe Acute Respiratory Syndrome on Hong Kong Property Buyers
In this paper, the first part of our study, we use a linear statistical technique to examine the impact of the announcement of China's decision to take back Hong Kong from the United Kingdom in 1982, the Tiananmen Square incident of 4 June 1989, the Asian financial crisis (AFC) of 1997, and the outbreak of severe acute respiratory syndrome (SARS) in 2003 on Hong Kong's housing market in terms of prices. A total of 11362 residential transactions from a cluster of data for a large private-housing estate, considered to be representative of Hong Kong's private residential market, were used to test four hypotheses that evaluate the impact of shocks on property prices through the use of a hedonic price model. The influences based on the statistical findings, which satisfy the relevant goodness-of-fit tests, are (a) that the sovereignty crisis exerted immediate significant negative price effect, but property prices rebounded after a big decline when open diplomatic dialogue between the Chinese and UK governments began, (b) that the Tiananmen Square (4 June) incident had no significant price effect; (c) that the AFC caused a drastic decline in property prices; and (d) that the impact of the SARS outbreak was significantly negative for Amoy Gardens but not so for estates with fewer reported SARS cases.