Heritage Listing and Property Value: The Australian Experience

1. Heritage Listing and Property Value: The Australian Experience Janine Irons, Curtin University, Perth, Australia & Lynne Armitage, Bond University, Gold Coast, Australia

2. 1. INTRODUCTION • Objective Survey core literature on the impact of heritage listing on residential property values within an Australian context. • Why? “Of all the economic issues of heritage preservation, none is subject to so many opinions based on so few facts as the impact on property value” (Rypkema, 2005). “Concern amongst property owners about the perceived negative impacts of heritage listing on property values continues to undermine public support for heritage protection in Australia” (HCWA, 2009). Review + parent study conducted in response to concerns of this nature. 2011 ERES – Irons and Armitage HERITAGE

3. 2. FOCUS AND STRUCTURE • Focus • Australian research • Single-unit residential dwellings • Recent academic research & government studies (as relatively few academic works exist) • Structure • Central studies addressing heritage listing pricing affects are detailed and findings summarised. • Examination highlights methodologies employed, discusses key findings and concludes with a critique of the extant research. HERITAGE 2011 ERES – Irons and Armitage

4. 3. BACKGROUND Research in field has been undertaken for a little over three decades. Genesis - introduction of formal heritage listing mechanisms during the 1970s. Planning controls imposed with statutory listing giving rise to questions over effect on property value. Foremost issue – perception that diminution in property rights would negatively impact property value. This central concern main stimulus for research in this field. HERITAGE 2011 ERES – Irons and Armitage

5. 4. NATURE OF STUDIES Studies conducted in different geographical contexts, use various methodologies and data sources. All use some form of comparison process to examine relationship between property values on the basis of designation status. Sits within body of ‘treatment evaluation’ literature i.e. studies focus on the effect of an exposure/treatment on the outcome of interest. In essence a ‘natural experiment’ where effect of heritage listing is compared for treatment (listed) and control (non-listed) groups. HERITAGE 2010 ERES Milano – Irons and Armitage

6. 5. METHODOLOGIES Two primary methodologies employed. Difference-on-difference analysis Comparative analysis procedure used to compare change in outcomes between treatment and non-treatment groups. In context, used to compare value (usually appreciation rates and/or absolute values) between listed/non-listed properties. If listed property prices are higher (lower) or increase (decrease) more than those of comparable non-listed properties, then heritage listing is inferred to have a positive (negative) effect. HERITAGE 2011 ERES – Irons and Armitage

7. 5. METHODOLOGIES Regression analysis. Decompose prices into component parts by estimating implicit price of property attributes. Property viewed as bundle of attributes  marginal implicit prices of attributes can be identified and measured. Provides way to estimate effect of heritage listing on value, whilst holding other factors constant. Approach can permit a stronger statistical argument to be made than with DoD analysis. HERITAGE 2011 ERES – Irons and Armitage

8. 6. GOAL Establish if pricing differential exists between listed and non-listed property. Differential seen to reflect outcome of the market’s financial cost-benefit calculus i.e. is suggestive of net outcome of market’s appraisal of the costs & benefits associated with heritage listing. Consequent pricing affect may be negative, neutral or positive: with a premium seen where market perceives heritage benefits outweigh costs; a discount applied when costs are held to outweigh benefits; and a neutral pricing affect seen when costs and benefits are held to be in balance. HERITAGE 2011 ERES – Irons and Armitage

9. 7. RESULTS Table 1: Summary of Australian Heritage Pricing-Affect Studies for Single-Unit Residential Properties HERITAGE 2011 ERES – Irons and Armitage

10. 8. OVERARCHING THEMES Impact, if one exists, is more likely to be positive than negative. Listing generally has a marginal impact. Other macro and micro market factors (e.g. location) usually exert a far greater influence. Context matters e.g. neighbourhood & property characteristics, nature of the controls imposed, listing level, etc can produce more or less pronounced effects. Some consistent patterns emerge regarding the circumstances under which heritage listing may exert a positive or negative pricing influence. Negative effects are seen when development potential is removed/reduced. More stringent heritage controls generally appear to exert a value-diminishing influence. HERITAGE 2011 ERES – Irons and Armitage

11. 8. OVERARCHING THEMES Aggregation intensifies positive pricing effects, exerts stronger stabilisation effect & provides greater protection. Socio-economic context: more pronounced positive effects present in more affluent suburbs. Stronger price-pull effect as buyers in this market segment place greater value on factors like prestige & status, resulting in a higher premium for listed property. Despite limiting property rights, market generally perceives benefits associated with listing outweigh costs. Listing creates more certainty which reduces risk  future value may be both protected and promoted i.e. restrictions’ can act as ‘protections’. HERITAGE 2011 ERES – Irons and Armitage

12. 8. OVERARCHING THEMES Listing protects properties from broader fluctuations in the marketplace. Has a stabilising effect which insulates property values from lows in cyclical troughs. Weaknesses identified: all the usual associated with research of this nature i.e. use of transaction vs. appraisal data, sample size, richness (or rather lack thereof) in data sets, issues surrounding comparability, etc. Implications for rigour & generalisability of results. HERITAGE 2011 ERES – Irons and Armitage

13. 9. CONCLUSIONS Effects of listing on property value are not fixed, but rather exist on a continuum. At a macro level, statutory listing is more likely to have a positive or neutral effect on value than a negative one. Can always identify individual cases where significant value movement has occurred, but when taken as a whole, influence is typically marginal, with other factors exerting a more dominant force in the market. Context really matters e.g. ‘place’ or ‘property’ based listing, stringency of controls, socio-economic character of neighbourhood, etc. The most pronounced (negative) effects arise where development potential remains unrealised. HERITAGE 2011 ERES – Irons and Armitage

14. Many thanks for listening!Any questions? HERITAGE 2011 ERES – Irons and Armitage