The capitalized value of rainwater tanks in the property market of Perth, Australia

    Research output: Contribution to journalArticle

    12 Citations (Scopus)

    Abstract

    © 2014 Elsevier B.V. In response to frequent water shortages, governments in Australia have encouraged home owners to install rainwater tanks, often by provision of partial funding for their installation. A simple investment analysis suggests that the net private benefits of rainwater tanks are negative, potentially providing justification for funding support for tank installation if it results in sufficiently large public benefits. However, using a hedonic price analysis we estimate that there is a premium of up to AU$18,000 built into the sale prices of houses with tanks installed. The premium is likely to be greater than the costs of installation, even allowing for the cost of time that home owners must devote to research, purchase and installation. The premium is likely to reflect non-financial as well as financial benefits from installation. The robustness of our estimated premium is investigated using both bounded regression analysis and simulation methods and the result is found to be highly robust. The policy implication is that governments should not rely on payments to encourage installation of rainwater tanks, but instead should use information provision as their main mechanism for promoting uptake. Several explanations for the observation that many home owners are apparently leaving benefits on the table are canvased, but no fully satisfactory explanation is identified.
    Original languageEnglish
    Pages (from-to)317-325
    JournalJournal of Hydrology
    Volume522
    DOIs
    Publication statusPublished - 2015

    Fingerprint

    property market
    rainwater
    homeowner
    cost
    regression analysis
    premium
    simulation

    Cite this

    @article{2fe4a092e4464e628f95a2ffd2a1277b,
    title = "The capitalized value of rainwater tanks in the property market of Perth, Australia",
    abstract = "{\circledC} 2014 Elsevier B.V. In response to frequent water shortages, governments in Australia have encouraged home owners to install rainwater tanks, often by provision of partial funding for their installation. A simple investment analysis suggests that the net private benefits of rainwater tanks are negative, potentially providing justification for funding support for tank installation if it results in sufficiently large public benefits. However, using a hedonic price analysis we estimate that there is a premium of up to AU$18,000 built into the sale prices of houses with tanks installed. The premium is likely to be greater than the costs of installation, even allowing for the cost of time that home owners must devote to research, purchase and installation. The premium is likely to reflect non-financial as well as financial benefits from installation. The robustness of our estimated premium is investigated using both bounded regression analysis and simulation methods and the result is found to be highly robust. The policy implication is that governments should not rely on payments to encourage installation of rainwater tanks, but instead should use information provision as their main mechanism for promoting uptake. Several explanations for the observation that many home owners are apparently leaving benefits on the table are canvased, but no fully satisfactory explanation is identified.",
    author = "Fan Zhang and Maksym Polyakov and James Fogarty and David Pannell",
    year = "2015",
    doi = "10.1016/j.jhydrol.2014.12.048",
    language = "English",
    volume = "522",
    pages = "317--325",
    journal = "Journal of Hydrology",
    issn = "0022-1694",
    publisher = "Pergamon",

    }

    TY - JOUR

    T1 - The capitalized value of rainwater tanks in the property market of Perth, Australia

    AU - Zhang, Fan

    AU - Polyakov, Maksym

    AU - Fogarty, James

    AU - Pannell, David

    PY - 2015

    Y1 - 2015

    N2 - © 2014 Elsevier B.V. In response to frequent water shortages, governments in Australia have encouraged home owners to install rainwater tanks, often by provision of partial funding for their installation. A simple investment analysis suggests that the net private benefits of rainwater tanks are negative, potentially providing justification for funding support for tank installation if it results in sufficiently large public benefits. However, using a hedonic price analysis we estimate that there is a premium of up to AU$18,000 built into the sale prices of houses with tanks installed. The premium is likely to be greater than the costs of installation, even allowing for the cost of time that home owners must devote to research, purchase and installation. The premium is likely to reflect non-financial as well as financial benefits from installation. The robustness of our estimated premium is investigated using both bounded regression analysis and simulation methods and the result is found to be highly robust. The policy implication is that governments should not rely on payments to encourage installation of rainwater tanks, but instead should use information provision as their main mechanism for promoting uptake. Several explanations for the observation that many home owners are apparently leaving benefits on the table are canvased, but no fully satisfactory explanation is identified.

    AB - © 2014 Elsevier B.V. In response to frequent water shortages, governments in Australia have encouraged home owners to install rainwater tanks, often by provision of partial funding for their installation. A simple investment analysis suggests that the net private benefits of rainwater tanks are negative, potentially providing justification for funding support for tank installation if it results in sufficiently large public benefits. However, using a hedonic price analysis we estimate that there is a premium of up to AU$18,000 built into the sale prices of houses with tanks installed. The premium is likely to be greater than the costs of installation, even allowing for the cost of time that home owners must devote to research, purchase and installation. The premium is likely to reflect non-financial as well as financial benefits from installation. The robustness of our estimated premium is investigated using both bounded regression analysis and simulation methods and the result is found to be highly robust. The policy implication is that governments should not rely on payments to encourage installation of rainwater tanks, but instead should use information provision as their main mechanism for promoting uptake. Several explanations for the observation that many home owners are apparently leaving benefits on the table are canvased, but no fully satisfactory explanation is identified.

    U2 - 10.1016/j.jhydrol.2014.12.048

    DO - 10.1016/j.jhydrol.2014.12.048

    M3 - Article

    VL - 522

    SP - 317

    EP - 325

    JO - Journal of Hydrology

    JF - Journal of Hydrology

    SN - 0022-1694

    ER -