The Cost of Noise - The Effects of Road Noise on House Prices

The Danish Department of the Environment (Miljøstyrelsen) has recently published findings of its research into the effects of road noise on house prices.

The Danish Government is evaluating different initiatives to reduce road noise, taking the cost and benefits into consideration. To be able to estimate the benefits (health and welfare) associated with reducing road noise, it is necessary not only to quantify these effects, but also to put a price on them.

Part of the nuisance effects from road noise can be evaluated by using the hedonic pricing method that makes use of the fact that the price of a house reflects several parameters (e.g. area, age, number of toilets and the position of the house). By estimating a model including these elements, it is possible to isolate the effect of one single parameter, in this case road noise .

The study shows that houses affected by road noise are significantly cheaper than other houses. The price of houses affected by road noise above 55dB and situated near 'ordinary' roads declines by 1.2% per dB. The price of houses near motorways declines by 1.6% per dB. If houses exposed to road noise below 55dB are also included in the model, the average effect on house prices is less 0.9% for houses near 'ordinary' roads and 1.5% for houses near motorways.

Looking in detail at the 8 areas in Greater Copenhagen in the study, it can be seen that the effects on house prices vary from 0.75% to 1.01% for houses near 'ordinary' roads and 1.06% to 2.29% for houses near motorways (including houses exposed to road noise below 55dB).

It is not certain whether a potential house owner considers the exact level of noise when he is buying a house, or rather the distance from the noisy road. In one of the models, this parameter is included together with a parameter that describes if a certain house is placed in the first row next to a noisy road or not. A house placed right next to a noisy road is worth 6% less than a house further back. House prices increase by 0.05% if the distance from a noisy road increases by 1%.

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