The Impact of Environmental Factors on Real Estate Prices

The research paper analyses the impact of environmental factors like air pollution level and exported and recycled waste on the real estate prices in Russia. The real estate sector contributes the most to the economic sector and the country’s development. However, it is now widely accepted, that the property prices relate not only to economic factors like unemployment, interest rates, etc. but the individual characteristics of the building and the environment where it is located. But what matters more nowadays is the increased attention to the ecological issues that also shape our consumption patterns in real estate also. Nobody wants to live in a littered are and suffer from bad air conditions. But do we have to pay for it? The main aim of this paper is to test the significance of environmental factors for shaping the real estate market prices on the Russian market. The analysis is based on the regional and city level data of air pollution and waste export and recycling rates taken from the federal statistics resources. The main outcomes are that air pollution is negatively correlated to the property price at the regional levels, but this evidence is not present at the city level. The property price index can go down by as much as 47% of the mean value of index with an increase in the number of cars per 1000 persons by 1%. However, waste export and recycle rates show the high significance and positive correlation for both regional and city data. Real estate unit’s price can be increased up to 5 index units or to almost 6,5 thousand rubles per square meter for the increase in the waste export and recycle rates by 1%. Key Words: real estate market, environment, price formation