Calculating the cost of overheads: the real impact of HVOTLs on house price

Abstract

Purpose

The purpose of this paper is to establish whether or not asking price can provide a reliable indication of the impact of a negative externality when transaction data are scarce.

Design/methodology/approach

Until recently, transaction data within the UK were either unobtainable or expensive. Subsequently, an analysis of the value impacts of living near negative externalities (such as high voltage overhead power lines (HVOTL)) relies almost entirely on valuer expertise. Since behavioural research suggests that valuers often anchor to asking price which, in theory, is based on the selling agent's opinion of the likely transaction value of a property, the argument is made that “asking price” provides a reliable indication of the impact of a negative externality when transaction data are scarce. This theory is tested through an analysis of the real versus perceived impacts of an HVOTL on proximate house prices.

Findings

The results, whilst providing additional evidence to support the relationship between value diminution and the presence of an HVOTL near residential homes, suggest that agents' marketing price does not capture the true impact of this type of negative externality and should therefore be treated with caution by practitioners seeking to establish the value of this type of property.

Originality/value

The results of this article add additional evidence to support the findings from previous studies in this field.

Citation

Sims, S., Dent, P. and Ennis‐Reynolds, G. (2009), "Calculating the cost of overheads: the real impact of HVOTLs on house price", Property Management, Vol. 27 No. 5, pp. 319-347. https://doi.org/10.1108/02637470910998474