Factors affecting housing modifications and housing pricing: A case study of four residential neighborhoods in Haifa, Israel

The relationships among three groups of variables - environmental conditions in residential neighborhoods, post-occupancy housing changes and modifications (HCMs), and the market values of residential properties - are investigated. While traditional hedonic modeling assumes the existence of direct links between environmental factors and property values, this paper suggests that such links are indirect and work through the investment decisions of homeowners, who choose to invest (or not to invest) in the maintenance and/or expansion of their properties. To verify this assumption, HCMs accumulated in four residential neighborhoods in Haifa, Israel are analyzed. The findings indicate a fairly strong association between environmental factors, building characteristics, rehabilitation activity and property values in these neighborhoods. The paper suggests an extra benefit for improving the environment, due to the dynamic process that may cause further investment.