The Value of the Provision of a Balcony in Apartments in Hong Kong

A balcony is often perceived as a "green" provision in modern residential buildings, as it enhances energy efficiency (providing natural lighting and ventilation), mitigates traffic noise, improves the circulation of fresh air, and provides planting space. However, how the market values the benefits of balconies is seldom studied due to the difficulty in separating such benefits from other associated effects such as view enjoyment and security concerns. This paper attempts to study (i) the implicit value of a balcony, (ii) the green effects of balconies on the prices of residential properties, and (iii) the effect of security concerns on balconies situated on lower floors. A sample of transactions in a private housing estate in Hong Kong has been studied. The sample contains apartments with and without balconies. The estate provides a sufficient variation of views in different balconies, thus allowing separate identification of the effects of the provision of a balcony and the possession of a good view. A balcony is found to have a positive effect on the value of a property irrespective of the quality of the view. The negative effects of air and noise pollution on property prices are also found to be highly significant. Although security concerns are found on the low stories of a building, the provision of a balcony does not aggravate the hazard. Finally, the log-linearity assumption in the empirical price model is relaxed by applying the Box-Cox transformation to the continuous variables