The effect of view on house values: An empirical study on Yedigöller recreation area in Buca Izmir

A house is as a multi-component property that offers a wide field of research and its price has been subject to numerous studies in different disciplines. House price is determined by not only the physical characteristics of the unit but also by the characteristics of the area, including social and economic factors as well as the quality of the environment, where the unit is located. Hedonic price analysis has been one of the most popular techniques in explaining these factors.The aim of this study is to test the effect of presence of ?a pleasant view? on house prices using hedonic price analysis. Yedigöller recreation area in Buca, Izmir, Turkey, and its vicinity is selected as the study area based on the observation that house prices have increased significantly after the recreation area has been completed. The data used in the study includes 83 housing units sold between the years 2000 and 2008. The selling price, recomputed in June 2008 prices, is the dependent variable. There are 27 independent variables tested through the analysis. Through the analysis, more than 300 different models have been estimated using combinations of these variables in linear, semi-log and log-log forms. The model which explains the variance in the dependent variable best is selected as the final model. The final model includes a constant and five independent variables in logarithmic-linear (log-log) form. The independent variables include: the size of the house, the age of the house, the level of upkeep of the house, walking distance from the house to the shopping center, and the level of pleasantness of the ?view? from the house. The final model explains the 83 percent of the variance in house price and the variables are statistically significant at the 0.05 level.Using final model, it is estimated that when the view availability variable is increased from the lowest value to the highest one, or from 1 to 7, the price of a hypothetical housing unit, with all other variables held constant at the sample means, increases by 75,000 TL. When this amount is calculated by 410, the number of houses which gained a pleasant view with the construction of the Yedigöller Recreation Area, the total increase in the houses prices adds up to 30,750,000 TL. The total value increase is more than 8.5 times the construction cost of the recreation facility as reported by the Municipality. A taxation model can thus be developed to deduct a portion of this value increase to be used in the construction of other recreational facilities.