The value of the greenbelt in Vienna: a spatial hedonic analysis

This paper employs the hedonic price method (HPM) to examine whether the implicit value of the greenbelt is capitalized into apartment prices in the city of Vienna, Austria. We improve the traditional model using spatial econometric techniques and compare estimates from different spatial models, namely the spatial lag model (SAR), the spatial error model (SEM) and the spatial Durbin model (SDM). While our use of spatial models addresses the common problem of omitted variable bias, the SDM specifically allows for controlling possible nearby proximity effects (i.e., small-scale neighbourhood) that are rarely included in this type of analyses. Findings indicate that distance from the greenbelt is important in explaining apartment prices in Vienna: while the CBD exerts a centripetal force, the greenbelt, on the contrary, exerts a centrifugal force. The SDM is found to be the best performing model indicating existence of small-scale neighbourhood effects and presenting a solid case for consideration of this model in valuation of green amenities.