Impact of Airport Noise on Residential Property Values: Cairns Airport

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Impact of Airport Noise on Residential Property
Values: Cairns Airport
Bishop, Ron; Laing, Kathryn
https://research.usc.edu.au/discovery/delivery/61USC_INST:ResearchRepository/12132822660002621?l#13137209370002621

Bishop, R., & Laing, K. (2020). Impact of Airport Noise on Residential Property Values: Cairns Airport. Journal
of New Business Ideas & Trends, 18(1), 12–20.
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Bishop & Laing – Volume 18, Issue 1 (2020)

Journal of New Business Ideas & Trends
Vol. 18 Iss.1, June 2020, pp. 12-20.
”http://www.jnbit.org”

Impact of Airport Noise on Residential Property
             Values: Cairns Airport

Ron Bishop
Central Queensland University, Australia

Kathryn Laing
University of the Sunshine Coast, Queensland, Australia

Abstract
Purpose: The purpose of this study is to examine the impact of airport noise on
residential property values in the Cairns airport zone over the period 2012 to 2016.
Design/methodology/approach: The method employed is derived from the literature
and involved collecting qualitative data regarding residential values within the flight path
and outside the flight path. The data was examined using regression analysis and then
compared using the statistical t-test to determine the level of significance between the
average residential property values in the zones.
Findings: The data provides support for the propositions that being within the flight path
does have an impact on residential property values. The findings indicate that those
properties under the flight path had a significantly lower value during the period
examined.
Research limitations/implications: The study has implications for residential
developments within close proximity to existing airports as well as when airport
expansions are undertaken.

Keywords: Residential property values, airport noise.

JEL Classifications: Q53, R31, R41
PsycINFO Classifications: 3430
FoR Codes: 1501
ERA Journal ID #: 40840

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Bishop & Laing – Volume 18, Issue 1 (2020)

Introduction
        Recent concerns regarding residential developments in close proximity to the
Caloundra aerodrome on the Sunshine Coast of Queensland Australia resulted in both the
local government and State government considering the need to move the small aerodrome
to a less populated area (Hoffman, 2011). The tension in the local community and in the
political arena has been contentious for some time (Lander, 2010). However, the
Queensland State government’s final decision was that the airport was not to be moved.
Given that the airport in question was a small local airport that neither caters to domestic jet
airlines or international airlines the noise levels and the amount of air traffic would seem to
be minimal and yet it was sufficient to cause community concern.

        Just a relatively short distance north in the Maroochydore precinct there is a larger
airport that does cater for the domestic jet airlines and has been earmarked for expansion to
accommodate international airlines. This airport is now known as the Sunshine Coast
airport and it has old and new residential suburbs in close proximity so it would seem that
the impact of airport noise would be of a greater concern to the residents. With this
proposed expansion of the airport the concern for the impact of the noise on residential
property values would seem to be an issue for examination. Similar research exists on the
impact of the larger international airports in the Capital cities around Australia the most
prominent being the Sydney International airport. However, these are airports with a long
history of having been subject to international air traffic so the use of these airports would
not provide a suitable comparison for the Sunshine Coast airport. A good example of
regional airports that went from handling domestic air traffic to international air traffic is
the Cairns airport.

       The impact of noise pollution on residential property valuations for suburbs in close
proximity to airports has been the subject of research over a number of years. Various terms
have been used to describe this affect such as diminution of vale due to detrimental
conditions (Bell, 1999; Mense & Kholodilin, 2014).

Literature Review
        The most commonly used approach to measuring the effects of environmental
influences on house prices is the hedonic price estimation as espoused by Rosen (1974) and
Johansson (1987). The hedonic approach is based upon the assumption that when a
consumer purchases a particular good they are also acquiring the associated environmental
good. Thus, when a house is purchased the environmental characteristics are acquired by
the buyer. By implication regressing the characteristics of the purchased good combined
with the environmental characteristics, against the price paid, it produces the contribution
the environmental good to the price paid (Boyle & Kiel, 2001). The correlation between
airport noise and property prices has been the subject of research of a number of European
and American airports (Nelson, 1980; Penninton, Topham & Ward, 1990; Uyeno, Hamilton
& Biggs, 1993).

       Prior research reported by Bell (2001) revealed losses in market values at the Los
Angeles International airport for low priced homes as -0.8% and for moderately priced
homes as ranging from -15.7% to -19.0% and at the John F. Kennedy Airport in new York
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Bishop & Laing – Volume 18, Issue 1 (2020)

the losses were -0.12% per dBA for low priced homes, -0.46% per dBA for moderately priced
homes and -1,35% per dBA for high priced homes. Using distances from the airport of the
FedEx air-cargo hub in North Carolina Jud and Winkler (2006) reported property prices as
having declined by 9.2% within 2.5 mile of the airport and 5.7% for properties between 2.5
and 4 miles. Interestingly, this air-cargo hub was situated in a regional area and in that
respect holds certain similarities to the regional airports being examined in this study.

        Associated with the impact of aircraft noise is the distance from an airport and the
height of the aircraft which the study by Mense and Kholodilin (2014) examined and
reported that where the flight altitude is below 1,000 meters the decline in the property
price is between 11.8% and 12.8%, as compared to an average of 8.3% for flight altitudes
above 1,000 meters. The most common measurement of noise is dB(A), where the “A”
indicates a rating adjustment that corrects for the fact that humans hear middle frequencies
better than low or high frequencies. The extent of the harmful effects of noise levels as
measured by the dB(A) have been categorised in prior research (Bell, 2001) and are
summarised in Table 1.

Table 1:
dB(A) Noise Levels at which harmful effects begin to occur

    dB(A) Levels                                            Harmful Effects
       75-85                   Hearing loss
       65-75                   Extra-auditory physiological effects
       50-60                   Speech interference
       45-50                   Interruption of sleep
         Source: adapted from Bell (2001)

        Early research on the effect of noise on residential property values (Walters, 1975;
Pearce, 1978; Nelson, 1980; O’Bryne, Nelson & Seneca, 1985; Pennington, Topham & Ward,
1990) using the hedonic price estimation approach point to there being a small, negative,
but statistically significant effect on the valuations of houses.

        Whilst studies have found noise to be related to a diminution of property values not
all studies have found noise to be a significant factor. The study of the Boston airport by Li
and Brown (1980) found that a variety of neighbourhood and environmental factors were
more statistically influential than noise pollution. The prior research provides a general
approach to classifying residential areas into zones is direct proximity to the airport flight
paths as well as those which are by virtue of their position and distance outside the likely
noise zones (refer Figure 1). The noise level or dB(A) level of the aircraft are considered to
be different enough to make the proximity to the airport either a significant cause for
concern or not as the case may be.

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Bishop & Laing – Volume 18, Issue 1 (2020)

Figure 1:
Airport Diminution Zones

       Noise contours are used to show the way in which the noise produced by aircraft is
dispersed in much the same way as contours are used on a map to indicate height. The noise
contour map that was developed for the Cairns airport is presented in Figure 2.

Figure 2:
Estimated Cairns Airport Noise Contour Map 2005

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Bishop & Laing – Volume 18, Issue 1 (2020)

Research Method
        The method used in this study is based upon the hedonic price equation as used in
prior research (Bell, 2001; and Rahmatian & Cockerill, 2004). The equation is modified to
suit the different aspects of the situations under investigation and the availability of data. To
test the relationship between the sales price of house within the flight path and those
outside the flight path regression analysis was used. The research involved the comparison
between the values of properties in the flight path (flight path 1) and outside of the flight
path (flight path 2) in the vicinity of the Cairns airport. A t-test was chosen to provide
support for the regression analysis concerning the mean of the sale prices. The data
concerning the sale price of properties sold in the various suburbs were obtained from the
records of Australian property sales database of realestate.domain.com.au in conjunction
with RP Data property reports. The sales information was extrapolated for the period 2012
to 2016.

        Details of the, flight paths, aircraft levels and noise contours pertaining to Cairns
Airport were derived from various reports produced by Airservices Australia. Three suburbs
identified as being within the flight path (category 1) were selected and for comparison 2
suburbs outside the flight path (category 2) were selected (see Table 2). In essence, the
purpose was to limit the sample to properties located in areas of a similar nature that were
outside the noise level zone as indicated by the noise contour map of Figure 2.

Table 2:
Suburbs Flight Path Indicator

 Suburb #         Suburb Name     Flight Path

       1        Machans Beach          1

      2         Holloway Beach         1

      3         Yorkeys Knob           1

      4         Aeroglen               2

       5        Stratford              2

        The data regarding the properties sold in the areas was effectively the variables for
the research and covered – year of sale; sales price; vacant land, house or unit; number of
bedrooms; number of bathrooms; lock up garage (number of cars accommodated); suburb;
flight path; distance from airport. In keeping with prior research, the statistical analysis
involved application of the t-test and multiple regression to assess the validity of any
differences between sales within the flight path against those outside the flight path.

Results

      The average price of homes in the zones highlights that there was a relationship
between the distance to the airport and property values (homes). The average prices of land,
homes and units within the flight path was $ 429,106 whilst for those outside the flight path
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Bishop & Laing – Volume 18, Issue 1 (2020)

it was $ 515,638 which is a dramatic difference and one which suggest that the data required
further investigation. In particular, this reflects the total accumulated sales and so the raw
data was then broken down into segments that better matched the nature of the sales
between the areas. Firstly, the number of sales for vacant land only was rather small and
disproportionate, the concern was that these created outliers, so land sales were excluded
from the sample. Secondly, the number of sales of units were also found to be grossly
disproportionate to the point of creating a distortion of the data for comparison between the
two zones and were subsequently deleted. Thirdly, the most prominent feature of the houses
and units, that dictated the sales value was found to be the number of bedrooms, so this
became a key variable in the consideration of the comparison. The moderating variables
were then identified as the number of bathrooms and the number of parking spaces in lock
up garage facilities.

        The total number of sales for houses was 43 within the flight path and 70 outside the
flight path. The average of the sale prices within the flight path was $ 429, 106 whilst for
those outside the flight path it was $ 515,638 which is a 16.78% difference. The regression
analysis indicates that the difference between the sales prices for the two groups was
significant at the P >0.001 level (see Figure 3). The R squared indicated that the model
accounted for 85.30% of the variance.

Figure 3:
Regression Analysis of Sales Price against Flight Path

        Having established through regression analysis that the difference between the sales
prices were statistically significant provides confirmation that being within the flight path as
against being outside the flight path did have an impact upon the value of the houses.
However, to provide some additional confirmation further analysis was conducted on the
mean of the sales price for the two groups. This was undertaken through the application of a
t-test assuming unequal variances, the results are reported in Figure 4.

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Bishop & Laing – Volume 18, Issue 1 (2020)

Figure 4:
Comparison of the Mean of Sales Price t-test: Two-Sample Assuming Unequal
Variances

        The results indicate a statistical significance P = 0.00451 with the t Stat of 2.6648
being greater than the t Critical one-tail of 1.6607. This provides further confirmation that
the variance between the mean of the sales price for the houses within the flight path were
significantly different to those outside the flight path.

        Interestingly, there was a dominant proportion of houses that were comprised of 2
or 3 bedrooms, 81% in the flight path as compared to 49% outside the flight path. Breaking
this down there were 22 houses in the flight path with 3 bedrooms - 12 with 1 bathroom - 9
with 2 bathrooms – and 1 with 3 bathrooms. Comparatively, there were 27 houses outside of
flight path with 3 bedrooms - 19 with 1 bathroom - 7 with 2 bathrooms - and 1 with 3
bathrooms. There were 13 houses in the flight path with 2 bedrooms - 12 with 1 bathroom –
and 1 with 2 bathrooms; there were 9 houses outside of flight path with 3 bedrooms - 8 with
1 bathroom - and 1 with 2 bathrooms. In total there were 36 outside of the flight path
(Variable 1) and 35 in the flight path (Variable 2) the variances between the means was
assessed using a t-test as presented in Figure 5.

Figure 5:
Comparison of 2 and 3 Bedroom houses t-test: Two-Sample Assuming Unequal
Variances

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Bishop & Laing – Volume 18, Issue 1 (2020)

        With a 12.60% difference between the mean values of the sales prices the results
indicate a statistical significance P = 0.02167 with the t Stat of 2.0605 being greater than the
t Critical one-tail of 1.6686. This provides further confirmation that the variance between
the mean of the sales price for the houses with 2 and three bedrooms within the flight path
were significantly different to those outside the flight path.

Discusion

       This study provides evidence consistent with prior research that airport noise can
have a negative impact on the values of residential properties. The findings highlight that
the impact is evident for properties in zones within the flight paths of the particular airport.

        The implications of this study are that when the expansion of any airport or for that
matter residential developments is being considered, as has been the case in the Sunshine
Coast, the resulting is likely to have an impact leading to the diminution of the residential
property values directly under the flight paths. However, it is possible that new technologies
relating to building materials etc of residential buildings along with advancements in
aircraft design may have a mitigating effect, at this point in time this is speculative and will
be a matter for future research to investigate.

        There are limitations to this research that should be taken into consideration
especially since prior research has indicated the other variables may be just as important in
determining property values such as noise of main roads, proximity to public transport,
proximity to schools, proximity to shopping centres, construction of the house, age of the
house, land use zoning. As the data for these variables were not readily available, they were
not included in the analysis.

References
Bell, R. (2001). The impact of Airport Noise on Residential Real Estate, The Appraisal Journal, 69(3), 312-321.
Collins, A. & Evans, A. (1994). Aircraft Noise and Residential Property Values: An artificial neural network
          approach, Journal of Transport Economics and Politics, 28(4), 175-197.
Frankel, M. (1988). The Impact of Aircraft Noise on Residential Property Markets, Illinois Business Review,
         45(5), 8-13.
Hoffman, B. (2011). Homes to be under flight path, Sunshine Coast Daily, 10 Sep.
         https://m.sunshinecoastdaily.com.au/news/homes-to-be-under-flight-path-further-investment-
         i/1098667/
Johansson, P. (1987). The Economic Theory and Measurement of Environmental Benefits, Cambridge
        University Press: Cambridge.
Jud, G. & Winkler, D. (2006). The announcement effect of an airport expansion on housing prices, Journal of
         Real Estate Finance & Economics, 33(2), 91-103.
Lander, A. (2010). Council to decide Airport's future, Sunshine Coast Daily, 8 April.
         https://m.sunshinecoastdaily.com.au/news/caloundra-airports-future-up-to-council-aerodrome/504721/
Levesque, T. (1994). Modeling the Effects of Aircraft Noise on Residential Housing Markets: A Case Study of
        Winnipeg International Airport, Journal of Transport Economics and Politics, 28(2), 199-210.
Li, M. & Brown, H. (1980). Micro-Neighborhood Externalities and Hedonic Housing Prices, Land Economics,
         56, 125-140.
Nelson, J. (1980), Airports and Property Values, Journal of Transport Economics and Policy, 14(1), 37-52.
O’Bryne, P., Nelson, J. & Seneca, J. (1985), Housing Values, Census Estimates, Disequilibrium, and the
         Environmental Cost of Airport Noise: A Case Study of Atlanta, Journal of Environmental Economics
         and Management, 12, 169-178.

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Bishop & Laing – Volume 18, Issue 1 (2020)

Paul, M. (1971). Can Aircraft Noise Nuisance be Measured in Money?, Oxford Economic Papers, 23(3), 297-322.
Pearce, D. (1978). Noise and Nuisance. In: D.W. Pearce (ed.): The Valuation of Social Cost, George Allen &
         Unwin: London.
Pennington, G., Topham, N. & Ward, R. (1990). Aircraft Noise and Residential Property Values adjacent to
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Pitt, M. & Jones, M. (2000). Modelling the effect of airport noise on residential property values: An examination
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Rahmatian, M. & Cockerill, L. (2004). Airport noise and residential housing valuation in southern California: A
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Tomkins, J., Topham, N., Twomey, J. & Ward, R. (1998). Noise versus Access: the impact of an Airport on Urban
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Walters, A. (1975). Noise and Prices, Clarendon Press: Oxford.

© JNBIT Vol.18, Iss.1 (2020)                                                                                     20

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