EFFECT OF BROTHELS ON RESIDENTIAL PROPERTY PRICES

Abstract

This study investigates brothel as a form of externality which impacts upon residential properties prices. Dismay concerning prostitution sprawling into local residential areas has been widely reported in recent months. In view of the evolving concern, this research attempts to unveil the relationship, if any, between proximity to brothels and residential property prices. Depressing effect on property prices, if any, will be a form of economic cost relating to prostitution. An enhancement to the prevailing quantitative approach is made by integration of a qualitative aspect into the research. Using hedonic theory, the multiple regression analysis revealed opposing relationships for two segmented housing markets under study. While brothels are evidenced to have negative influence upon private property prices, the effect on prices for public residential properties is not detected in the quantitative analysis. Insights from the survey research suggest possible explanations to the preceding phenomenon. Relatively, public residential properties in the study area are better segregated from the red light area than private residential properties. Therefore, while residents living in public housing are less exposed to nuisances associated with prostitution activities, they still enjoy the amenities, locating in proximity to brothels, which residents from the private residential properties enjoy. The negative influence upon private property prices is also found to be non-monotonic and contained within 1km from boundary of red light area.