ESTIMATING THE ECONOMIC VALUES OF URBAN ENVIRONMENTAL AMENITIES AND DISAMENITIES THROUGH RESIDENTIAL PROPERTY PRICES: EVIDENCE FROM WESTERN PESHAWAR, PAKISTAN

Abstract

This study examines how environmental amenities and disamenities are capitalized into residential property values in western Peshawar, Pakistan, using the hedonic pricing method (HPM). The analysis is based on transaction records of 338 residential properties and considers their structural, neighborhood, locational, and environmental characteristics. Given evidence of spatial dependence in residential property prices, a spatial lag specification is employed to account for interactions among geographically neighboring properties. The results indicate that structural characteristics, including house age, number of bedrooms, guestroom availability, and green open space, are positively associated with residential property values. Similarly, good street conditions and corner locations exhibit positive and statistically significant relationships with house prices. Among the environmental attributes, greater distance from a polluted stream is positively associated with property values, suggesting that proximity to polluted waterways represents a residential disamenity. Access to recreational sites also exhibits a positive and statistically significant association with house prices. The estimated spatial dependence parameter is positive and statistically significant, highlighting the importance of accounting for spatial interactions in urban housing markets. These findings emphasize the economic significance of environmental quality and recreational amenities in residential property markets and provide evidence to support urban policies aimed at controlling industrial pollution, rehabilitating polluted waterways, improving land-use planning, and expanding recreational green spaces.