Capitalization of Urban Green Vegetation in a Housing Market with Poor Environmental Quality: Evidence from Beijing

Abstract

Urban green vegetation provides amenity value for urban residents and improves the living environment. These changes in value can be reflected in the variation of house prices. This paper uses a unique housing transaction data set to estimate the impact of urban green vegetation on house values in Beijing, China, using the hedonic price model. To measure urban green vegetation, we calculated the normalized difference vegetation index (NDVI) by time-series Landsat TM 8 remote-sensing imagery. For model specification, we applied spatial lag models to address spatial spillover effects that might lead to biased estimates if ignored. Spatial hedonic results indicate that urban green vegetation has a positive effect on residential housing prices when the measurement scale of NDVI value is smaller than or equal to 18.1 acres for each block of flats, whereas greater NDVI values generate a negative effect on property values if the scale is larger. This implies that urban green vegetation within 135 m could increase house prices in the range of 7.95–1.59%, which indicates a potential 2.2–26.9 billion yuan increase in the value of the sample real estate market in Beijing.