The Demand for Local Amenity: An Hedonic Price Analysis

Abstract

In this paper the author investigates the demand for housing characteristics and proximity to local amenities in Perth, Western Australia. By application of hedonic price theory to a sample of house transactions the implicit prices for individual characteristics are estimated and used to estimate inverse demand curves for these characteristics in a second stage analysis. The results confirm the importance of proximity of river, parks, and highways in determining house prices. River views are found to be particularly important being valued at 28% of average selling price. From the inverse demand curves income elasticities of willingness to pay are found to range from 1.0 for age of house to 0.43 for proximity to the river.