Nonlinearity, Outliers and Reference Market Depth: Risk Factors in Searching for the Relationship Between Real Estate Prices and Airport Noise
Purpose: The primary objective of this study was to verify the hypothesis of nonlinearity in the relationship between noise levels and unit prices of single-family homes in the Restricted Use Area of Warsaw Chopin Airport. Furthermore, an endeavour was made to ascertain the benchmark for the depth of the reference market. The impact of sample heterogeneity and the significance of outliers for estimation results were examined. Design/Methodology/Approach: A variety of methodologies were employed, including general linear models, methods for identifying outliers, and optimisation-based clustering. Findings: The study's findings corroborated the deleterious effect of elevated aircraft noise levels on property transaction values, concomitantly emphasizing the non-linear nature of this effect. It has been demonstrated that as the distance of a property from the center of the airport runway increases, the discrepancy in unit prices between properties located inside and outside the Restricted Use Area decreases. It has been demonstrated that the presence of unconventional observations can have a detrimental effect on the quality of the resulting models. Practical Implications: The findings have important planning and policy implications. It is submitted that they can serve as a basis for defining restricted use zones, developing compensation mechanisms, and designing spatial planning principles for residential areas located near airports. These actions are consistent with the objectives of Directive 2002/49/EC on the assessment and management of environmental noise, which underscores the necessity of incorporating noise protection measures into urban and transport policies. Furthermore, the findings emphasise the risk dimension associated with residing or investing in areas exposed to elevated levels of aircraft noise. From the perspective of investors and local governments, this risk is manifested in market volatility, reduced liquidity, and the necessity for risk mitigation strategies. Originality/Value: The study was based on unique data gathered as part of projects carried out on behalf of the largest Polish airports between 2008 and 2023. Another significant innovation was the utilisation of cluster analysis to enhance the homogeneity of the research sample. However, the greatest added value was the estimation of the maximum depth of the reference market, i.e. the area with an acceptable noise level from which transactions used in comparative analyses may originate, and the confirmation of the non-linear impact of noise levels on the unit price of properties located in Restricted Use Areas.