| Abstract: |
Legal title is a crucial instrument to secure the possession of assets and to
enable the transfer of property in the formal market system. Without legal
titles, property holders will be posed to a great threat of expropriation and
eviction, and they will also feel hard to derive economic benefits from
property exchanges because of restrictions from formal institutions. As
pointed out by De Soto, a property without legal title is the dead capital
rather than the asset that can accumulate wealth. Previous studies have
assessed the market value attached to spatial distributions of dwellings in
the absence of full legal titles by investigating the transaction of informal
housings, because 'location' always matters in the real estate analysis.
However, the concept of location not only refers to the geographical position
at the horizontal dimension, but also involves other settings on the vertical
dimension. Different vertical locations may bring different utilities for
dwellers, leading to the variation of housing prices. Despite that, few
attentions have been paid to the valuation of vertical location of properties
when legal titles are absent. To fill this research gap, this study seeks to
decipher how consumers value the vertical attributes of dwellings under the
premise that de jure property rights are absent. The housing market in the
urban fringe of China provides an ideal laboratory to conduct this
investigation. Besides formal housings, a unique informal property named small
property rights housing (SPRH) is also an important residential source for
local people at the fringe of megacities. This type of informal housing is
built on rural land collectively owned by villagers and then sold for urban
residents without collective memberships. Like most formal residences in
China, SPRHs are built in high-rise forms, and they can provide dwellers with
spacious buildings, high-quality facilities and pleasant surroundings. In
fact, it is hard to distinguish SPRH projects from other formal residential
communities in terms of physical features. Despite the impressive built
environments, SPRH still cannot be titled by governmental agencies. This is
because that the development of SPRH fails to adhere to restrictions on
collective-owned land use regulated by formal land systems. Due to the lack of
legal titles, the transaction of SPRH is excluded from formal housing market
of China, and it can only occur under the shadow. An empirical estimation is
carried out with a dataset from an urban-fringe township named Chang’an where
SPRH transactions are quite active. By comparing the difference in prices paid
for formal housing units and SPRH units in the local housing market, this
study finds that the selling price of SPRH unit at the local is significantly
lower than that of formal housing unit with similar characteristics, all else
being equal. More importantly, this study captured that the absence of legal
titles can impact the value contribution of vertical attributes to the overall
prices of housing units. Specifically, this study finds that: (i) the lack of
full legal title can enhance the detrimental effect of building height on the
selling price of housing unit; (ii) although high-rise residence has been the
norm in urban China, dwellers still prefer to living in multi-storey buildings
by paying price premiums, and this preference is stronger if the title of
dwellings cannot be registered by formal authorities; and (iii) the deficiency
in legal title status does not impact the valuation of consumers on the
vertical position of housing units in the high-rise block. These findings
reveal interesting interactions of property rights, housing attributes and
housing prices from the vertical dimension. This research can shed new light
on the understanding of market value of legal titles in a broader context. |