We investigate how air pollution affects the transaction prices of high-rise apartments in
Hong Kong. We use a three-dimensional Reynolds-stress turbulence model to
simulate the air pollution level of each unit in high-rise apartment buildings in a densely
populated area in Hong Kong (Study Area). We then verify the simulated results with
site measurement data. Although the area is small, the variety of building forms and
location of streets resulted in significant variation in air quality across apartment units.
The apartments in the Study Area are actively traded and relatively homogenous. We
estimate the implicit price by constructing a hedonic price model that includes the
simulated apartment specific air pollution level as one of the explanatory variables.
We find that the apartment prices are more sensitive to air quality in more polluted
areas.published_or_final_versio
