«THE UNIVERSITY OF HONG KONG THE IMPACT OF FENG SHUI LANDSCAPE ON RESIDENTIAL PROPERTY PRICES IN HONG KONG A DISSERTATION SUBMITTED TO THE FACULTY OF ...»
THE UNIVERSITY OF HONG KONG
THE IMPACT OF FENG SHUI LANDSCAPE ON
RESIDENTIAL PROPERTY PRICES IN HONG KONG
A DISSERTATION SUBMITTED TO THE
FACULTY OF ARCHITECTURE
IN CANDIDACY FOR THE DEGREE OF
BACHELOR OF SCIENCE IN SURVEYINGBY TAM SZE MAN HONG KONG APRIL 2009 Declaration I declare that this dissertation represents my own work, expect where due acknowledgement is made, and that it has not been previously included in a thesis, dissertation or report submitted to this University or to any other institution for a degree, diploma or other qualification.
ii Acknowledgements I would like to take this opportunity to express my sincere thanks to some people whom I owe great gratitude.
I would like to express special thanks to my supervisor, Professor K.C. Wong, for his generosity in giving me continuous advice, guidance and valuable comments throughout the whole process in this research. I am so grateful to Mr. Kwan Kam Kwong, an experienced Feng Shui practitioner, for his generosity in giving me advice and guidance. Special thanks are extended to John, for application of Eviews.
Moreover, I would like to thank my dearest family for the abiding love, support and encouragement.
Last, but not least, special gratitude to my friends and studio group mates for their heartening cheering, support and help. Without them, I would have finished this dissertation with great difficulties.
AbstractFeng Shui, the traditional practice intends to achieve the harmony between human and nature. Its unique understanding of man-land relationship can provide a reference for urban setting. However, not many literatures focus on the impact of the Chinese traditional belief- Feng Shui on the real estate market. This thesis, therefore, studies the impact of many Feng Shui landscape principles, of harmonizing people and structures with their environment, on residential property prices in Hong Kong.
This study does not prove the validity of Feng Shui principles. It examines the impact of Feng Shui landscape on property prices. Structural characteristics, locational and neighborhood factors affecting the residential market in Hong Kong are first introduced. Hedonic Pricing Model is applied to study the common characteristics which determine property prices. This model confirms the hypothesis that Feng Shui landscape positively affects property prices. Feng Shui Landscape brings larger premia to housing prices during the boom than the slump periods. Regression analysis for this model would be applied so that property prices can be explained by means of estimating the prices of individual characteristics of residential properties.
Previous studies on Feng Shui traits usually focus on the effects of one Feng Shui
town planning and property management, are limited. This research endeavors to study how different Feng Shui landscape principles, together with some other main characteristics on residential properties, affect property prices in Hong Kong. By using a common model, the research results, as presented in this study, may assist future urban planning, development, property appraisal and even individuals’choices in property investment.
Table 5.5 Results of Model for Mei Foo Sun Chuen Phase 3 during Boom 91 and Slump Period Table 5.
6 Results of Model for Allway Gardens during Boom and Slump 92 Period Table 5.7 Results of Model with Feng Shui Principles for Allway Gardens 94 Table 5.8 Results of Model with Feng Shui Principles for Mei Foo Sun 97 Chuen Phase 3
Feng Shui can be directly translated as “wind” and “water”. It is a traditional Chinese science of harmonizing the environment by balancing the energy. Feng Shui focuses on the well-being of the occupants to create a greater harmony, stronger sense of community, and higher quality of life. The practice of Feng Shui has been getting more attention in the construction industry, especially around the Pacific regions. In Hong Kong, where there is a large Chinese population, Feng Shui becomes a part of our daily lives. The architects sometimes apply the ideal Feng Shui model to the building designs. Individuals rely on Feng Shui to find a house that can bring the family health and wealth. Business communities consult Feng Shui practitioners when choosing offices and business locations.
There are mainly two schools of practices: the “Form” School (形勢派), and the “Compass” School (理氣派). The “Form” School assesses the reaction between the energy flow, “chi”(氣), and the environment. The “Compass” School uses a “pa kua” (八卦) and a kua number to assess the best energy flow for the occupants. These include concepts like “yin” (陰) and “yang” (陽), “chi”, and the Five Elements. “Yin” and “yang” are symbolized by the moon and the sun. The changing combination of negative “yin” and positive “yang”, dark and light, cold and hot, creates “chi”. “Chi” around us promotes growth, health and vitality. Feng Shui and various divinity methods promote the understanding of the Five Elements. These elements include Water, Wood, Fire, Earth and Metal and they correspond to different aspects of nature and the body. Energy flows from one element to the next. The interactions of the elements can be “expansive” (相生), “destructive” (相剋) or “exhaustive” (相泄).
Feng Shui practitioners aim to choose those good interactions which are beneficial to the occupants.
Feng Shui enhances the current planning process by evaluating the physical form through observation and management of the energy movement, “chi”. However, not many literatures focus on the impact of Chinese traditional belief- Feng Shui on the real estate market. Even if some western literatures begin to write Feng Shui, they mainly focus on the applications of Feng Shui in design or the vitality of Feng Shui in real practice.
With such a context, the effect of Feng Shui landscape principles on property prices in Hong Kong will be studied. It focuses on the residential market which dominates the property developments nowadays.
In this dissertation, we may learn how to handle Feng Shui aspects, how to approach them critically, and how to harness Feng Shui in property development. Through exploration, we may come nearer to its hidden truth. 1 It is hoped that Feng Shui and its impact on property prices will bring additional insights to the scientific and rational approaches for our dynamic built environment.
The main objectives of this research are:
To investigate Feng Shui landscape theories and the Chinese culture To identify price determinants of the residential property market in Hong Kong To analyse whether people would pay higher price for property with “good” Feng Shui landscape by applying hedonic pricing model To study the effects of Feng Shui landscape on property prices during the Tam, C. M. Tso, Tony Y. N. and Lam, K. C. (1999) Feng Shui and Its Impacts on Land and Property Developments, Journal of Urban Planning and development, December,1999 boom and the slump periods To make a set of guidance for the professionals in real estate and construction industry to make adjustment of independent variable for the property prices To assist the town planners in the urban setting by introducing Feng Shui landscape principles
1.3 Framework A literature review on theoretical background of property prices’ determinations will first be illustrated as the foundation for discussion. The variables will be selected based on ideas suggested from previous studies and the local situations of selected housing estates. The principles of Feng Shui landscape will be investigated. Multiple linear regression models will be constructed to examine whether people would pay higher price for property with “good” Feng Shui landscape. The empirical results will be discussed to examine the significance and magnitude of the effects of the variables on property prices. This thesis will be concluded at last with a summary of findings and implications as well as limitations of this study.
There are six chapters for this research. Chapter 1 is Introduction. Background, objectives and framework and importance of this study will be specified.
Chapter 2 is Literature Review. The Literature Review can be divided into two major layers. In the first layer, previous studies relating to the residential property prices will be discussed. Contributions of previous researchers with respect to the development of hedonic pricing model will be examined. Determinants of housing prices will be reviewed. Then, we will go through the luxury goods in the residential property market. In the second layer, Feng Shui culture and theories will be discussed so that we can conclude the reasons for using the “Form” School in this thesis. After that, the relationship between Feng Shui landscape and residential properties will be reviewed.
Chapter 3 will comprise of hypothesis and research methodology adopted in this study.
The regression analysis technique for this dissertation will be studied. Applications and rationales of regression analysis will be introduced. There will be 4 steps for testing the effects of Feng Shui landscape on housing prices.
Data and sources will be studied in chapter 4. Data collection will be discussed firstly.
Then the reasons for selecting Mei Foo Sun Chuen Phase 3 and Allway Gardens will be explained. Descriptive statistics of independent and dependent variables in this research will be summarized. The way of processing the data will be discussed in detail. The sources and reliability of data will finally be discussed.
Chapter 5 is Results and Interpretations. All results will be listed out and the signs of effects will also be discussed. The proposed model’s predictive power will be analysed.
In chapter 6, a conclusion will be drawn which will summarize the findings and implications of this study. Limitations of this study and further research areas will be examined.
1.4 Importance of this Study Most literatures only focus on how structural, locational and neighborhood attributes affect housing prices. But the impact of Feng Shui cannot be neglected in an ethical Chinese society. If Feng Shui landscape is shown to be significantly affecting the housing prices, it will greatly assist property appraisal, town planning, property management and individuals’ choices in property investment.
Whether Feng Shui landscape is a luxury goods will be tested in this dissertation.
When the premia for Feng Shui landscape is much higher than the overall residential property prices, it is an indicator of residential market reaching the peak. Similarly, lower than the overall property prices means reaching the trough.
Many researchers have studied the issues of determinants of property prices. This thesis applies hedonic price model to generate hedonic prices. Literatures will be reviewed in this chapter to develop groundwork with supported theories for hedonic price equations. Also, traditional Feng Shui belief and its relation to science and properties will be explored. This would help us assess Feng Shui landscape as premia in the residential property market.
2.2 Hedonic Price Theory Griliches (1961, 1971) 2 developed the hedonic price model to estimate hedonic prices of consumer goods in respect of quality change. Based on the hedonic hypothesis, Rosen (1974) analyzed supply and demand of the attributes which differentiate products in competitive markets. He modeled housing as a vector of Griliches, Z. (1961) Hedonic Price Indices for Automobiles: An Econometric Analysis of Quality Change, Models of Income Determination, Studies in Income and Wealth, 2, Columbia University Press for NBER and Griliches, Z. (1971), Price Indexes and Quality Change, Harvard University Press, Cambridge, Mass traits that relates to the consumer’s utility function. The interaction of bid functions of consumers and offer functions of suppliers produce the market clearing function. This function represents the hedonic price function. It is the marginal market trade-offs among various attributes associated with the goods. Rosen found that the hedonic function is neither a demand nor a supply function of properties alone. As an alternative, hedonic function is the locus of supply-equal-demand points for various attributes. As hedonic function shows that market prices are affected by many housing attributes, it is important for us to recognize the housing attributes when using the hedonic pricing model.
Linneman (1982) 3 examined transactions in a supermarket by using hedonic pricing model. An experiment of observing grocery shoppers as they went through the checkout line with different grocery items was carried out. The attributes are differences in family size, income, and other factors. For example, if he wanted to get a 7-oz can of beans’ price, the model would generate a predictive price without looking at its price tag. This experiment confirms that if the researcher knows the total prices and the items purchased by the consumers, he can find out the 7-oz can of beans’ price. This example shows that hedonic function measures only prices but it is Linneman, P. (1982). The Economics of Urban Amenties: Hedonic Prices and Residential Location.
Academic Press, Inc., pp 69-88 not supply or demand functions.
2.3 Housing Attributes Griliches (1971) 4 advised that finding all relevant characteristics is very important to hedonic pricing model. Butler (1982) 5 thought that attributes which are costly to produce and yield utility to residents should be considered. However, it is impractical to include numerous of housing attributes. Also, data with many characteristics are either unavailable or of very poor quality. Therefore, only variables which are most costly to produce and yield most utility to a resident will be included.