The effect of building density on housing prices and the supply of housing in Stellenbosch: the application of a Hedonic Price Model.
Thesis (MA)--Stellenbosch University, 2018.
ENGLISH ABSTRACT: Densification has received considerable interest worldwide as a solution to the exacerbated housing demands that are normally associated with rapid urbanization. The Stellenbosch housing market is characterized by very expensive residential properties and remain unaffordable to the average South African household. The municipality of Stellenbosch has put in place densification measures such as prescribing limits for floor area ratio (FAR), building coverage and building height guidelines to positively influence the production of houses by developers and investors. The aim of this research, therefore, is to investigate the impact of building density on the housing prices and the housing supply in Stellenbosch. The objectives of the research are twofold: firstly, to understand the impact of building density through FAR and building coverage area on the overall housing market in Stellenbosch, and secondly to identify the relationship of FAR and the other independent variables in estimation of housing prices in the different submarkets (neighbourhoods) in Stellenbosch. The study employs a hedonic regression model to investigate the impact of densification on housing prices. The research attempts to estimate the impact of densification on the overall market of Stellenbosch and subsequently look at the submarket housing variations across Stellenbosch. The hedonic models’ results confirmed that FAR is a significant determinant in predicting housing prices, while Building Coverage Area (BCA) is not statistically significant in most of the models. The FAR variable was found to be significant in all the models including the overall and the submarkets models. For estimating house prices, the overall model suggests that the coefficient of FAR is 6687.45 which implies that one unit of FAR will increase housing prices by R6687.45 per square metre when the other variables are controlled. The hypothesis that building density positively influences housing prices is supported by the model. The overall model indicates that the availability of a garage and swimming pool were insignificant in the Stellenbosch model but the other variables including, FAR, BCA, distance to CBD, distance to nearest school, plot size, and the six neighbourhood variables, were significant in estimating house prices in Stellenbosch.
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