Using contingent valuation to measure property value impacts
| Published date | 12 July 2011 |
| DOI | https://doi.org/10.1108/14635781111150330 |
| Date | 12 July 2011 |
| Pages | 448-459 |
| Author | Clifford Lipscomb |
| Subject Matter | Property management & built environment |
Using contingent valuation to
measure property value impacts
Clifford Lipscomb
Greenfield Advisors, LLC, Atlanta, Georgia, USA
Abstract
Purpose – The purpose of this paper is to measure the impact of a proposed biomass facility on
prospective property values using the contingent valuation method.
Design/methodology/approach – The paper uses a web-based survey approach to measure
respondents’ reactions to two scenarios: one that describes the study area currently and another that
also mentions the proposed biomass facility.
Findings – The paper found no statistically significant difference in the respondents’ WTP for a
house based on whether they read about the baseline scenario (no mention of the biomass plant) or the
proposed biomass plant.
Research limitations/implications – The survey sampled males, younger people, and those with
higher incomes relative to the county where the facility will be built. A few respondents, who were
offered very low bids (5 percent and 15 percent of their current home value), may not have understood
the question or were exhibiting strategic behavior.
Originality/value – This is one of the few studies that uses contingent valuation to measure
property value impacts.
Keywords Contingent valuation,Property values, Biomass, WTP,Real estate, Property management
Paper type Research paper
1. Introduction
The use of methods other than the three traditional approaches to real estate valuation
(income capitalization, cost, and sales comparison) is somewhat scarce in the real estate
literature. Pure reliance on one or more of these three approaches is warranted in many
situations facing the typical real estate researcher or appraiser. However, for
researchers working on assignments that contain unusual circumstances (such as
environmental contamination or a recent natural disaster), other methods may provide
evidence to inform highest and best use (H&BU), to assess the quality of market
transaction data, and to understand the motivations behind certain behaviors
exhibited in the real estate marketplace (e.g. why lenders choose not to lend on
contaminated properties generally). This evidence often would not be known if the
analyst were to rely solely on the three traditional valuation methods.
As one might expect, the suggested use of a method other than the three traditional
methods of valuation has met some resistance in the real estate community. The
hedonic pricing method, arguably the most common method used in real estate
analyses other than the three traditional approaches to valuation (because it closely
approximates the sales comparison approach), has gained general acceptance in the
real estate community. Other methods, however, such as the contingent valuation
method (CVM) and conjoint analysis, have not gained such widespread acceptance.
The forthcoming article by Lipscomb et al. (forthcoming) offers an overview of CV
theory and practical guidance on the use of the CVM in real estate damage estimation,
including ways to mitigate the inherent biases of the CVM.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1463-578X.htm
JPIF
29,4/5
448
Received December 2010
Accepted March 2011
Journal of Property Investment &
Finance
Vol. 29 No. 4/5, 2011
pp. 448-459
qEmerald Group Publishing Limited
1463-578X
DOI 10.1108/14635781111150330
To continue reading
Request your trial