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IJHMA
14,5
1092
Received 24 August 2020
Revised 18 October 2020
Accepted 27 October 2020
International Journal of Housing
Markets and Analysis
Vol. 14 No. 5, 2021
pp. 1092-1110
© Emerald Publishing Limited
1753-8270
DOI 10.1108/IJHMA-08-2020-0104
The external impacts of historic
landmarks and buildings on
townhouse prices in Vietnam
Doan Nguyen and Thu Hong Thi Nguyen
Department of Real Estate, University of Economics Ho Chi Minh City,
Ho Chi Minh City, Vietnam
Abstract
Purpose – This paper aims to explore the external spillover effects of landmarks and buildings with historic
preservation designation in Vietnam, a country marked with a unique property right regime and market
transparency. The study contributes to the existing debate over the impact of distance to historic preservation
sites and landmarks and property prices.
Design/methodology/approach – The study examines property data of 274 attached townhouses in Ho
Chi Minh City, Vietnam and estimates the spillover effects of historic preservation on property prices collected
during 2018–2019. The authors test for spatial autocorrelation by using the Global Moran’s I and Lagrange
Multiplier diagnostics and deploy different spatial regression models including SAR, SEM and SDM.
Findings – The authors find that there is a premium on the prices of townhouses near formally designated
landmarks and buildings. This premium decreases monotonically away from the historic sites. However, this
paper also demonstrates that there is a non-linear (U-shape) relationship between housing premium and the
distance to the nearest historic building.
Originality/value – This study is the first to take advantage of the surveyed property data to study the
external impacts of historic preservation designation on housing prices in Vietnam. The study also
contributes to the ongoing scholarly debate over the direction of the impacts. The study suggests that similar
to other amenities, the price effect of designation tends to fade away after a certain distance.
Keywords Spatial autocorrelation, External impacts of historic preservation, Housing market in Vietnam,
Property right regime, Spatial hedonic models, Townhouse prices
Paper type Research paper
1. Introduction
In a typical real estate market, the transaction price of the property reflects the buyer’s
preference for the design features and environment characteristics of the house which may
include proximity to historic structures and landmarks. The intuition follows that the
houses located outside a historic district or near designated properties are likely to benefit
from the amenity generated by the historic designation without suffering from property
right restriction. In that case, it is possible to observe a value premium when those houses
are bought and sold in the market. The earlier studies that look into both internal and
external impacts of preservation designation on property prices, however, offer mixed
results (Been et al., 2016). It appears that properties near a historic site or district may receive
This research is funded by the University of Economics Ho Chi Minh City, Vietnam. We would like to
thank Dr Nguyen Anh Tuan and Ms Pham Thuy Linh of the Ho Chi Minh City’s Department of
Planning and Architecture for their valuable technical support and provision of the historic
preservation data. We are also grateful to Professor Gabriel S. Lee and the anonymous reviewers for
their valuable comments.
positive impacts as their owners share the feeling of pride and identity and benefit from Historic
aesthetic and cultural values of the designated site or district while battling the fear of landmarks and
inclusion in the future expansion of historic districts (Noonan and Krupka, 2011). As
Vietnam’s real estate market is characterized by a unique property right regime and
buildings
incomplete market information, it remains unclear how the externalities of designation
impact property prices.
Vietnam’s Constitution and the 2013 Land Law establish that Vietnamese people only
own the right to use the land while the government acts as the representative owner of the 1093
land and determines land prices. Nevertheless, people do own their structure built on lands
such as houses and condominiums. In Ho Chi Minh City, the nominal and official land prices
are calculated by the city government for every street segment and used as a basis for the
estimation of tax and land use fees. The official prices are also used to estimate land
compensation when the government reclaims land from private homeowners for projects
that benefit the public. However, sellers and buyers name their prices for houses and the
transaction prices can be many times higher than the official and nominal prices maintained
by the government. Furthermore, the transaction prices are not accurately recorded in
government documents such as property history.
This study extends the existing literature by applying spatial hedonic models to estimate
the possible impacts of designated structures and landmarks on the transaction prices of
townhouses in Ho Chi Minh City. Changes in property prices due to designation are likely to
reflect demand factors because the imposed restriction does not affect the supply of new
development in the neighborhood of the historic preservation site. The authors use the
survey data of 274 attached townhouses over the 2018–2019 period. As a new contribution
to the literature, the authors add a quadratic term to the spatial models to capture the
possible non-linear relationship between proximity to historic buildings and property
values.

2. Literature review
Historic preservation is a topic widely discussed in the fields of planning and economics as it
affects property ownership but appears to be a powerful tool to preserve and conserve
heritage (Been et al., 2016). A number of scholars believe that historic designation can be a
tool to promote local tourism (Mason, 2005; Tan and Ti, 2020) and economic development
(Carruthers et al., 2010; Coulson and Leichenko, 2001; Tan and Ti, 2020) and increase values
of individual properties which have been designated or included in the designated district
(Angjellari-Dajci and Cebula, 2016; Asabere and Huffman, 1991; Been et al., 2016; Carruthers
et al., 2010; Coulson and Leichenko, 2001; Ford, 1989; Gilderbloom et al., 2009; Winson-
Gendeman et al., 2011). A number of scholars contend that due to its restrictive nature,
historic preservation limits to a substantial extent what the owner can do to his or her
property in terms of functionality and upkeep, resulting in a negative impact on housing
prices (Asabere and Huffman, 1994; Asabere et al., 1994; Been et al., 2016; Heintzelman and
Altieri, 2013; Schaeffer and Millerick, 1991).
Property owners in historic districts are likely to face significant risks as the restrictions
on homeowners’ rights may outweigh any benefits of designation (Asabere and Huffman,
1991). As the market value of the property reveals the buyer’s and owners’ preference for the
risks and the benefits of purchasing and owning the property, the value can be reduced in
this case. In a study that examined both internal and external impacts of historic
designation, Schaeffer and Millerick (1991) show that properties with national designation
were likely to gain value while those with local designation were likely to lose value. This
result has been corroborated in a study that examined local historic designation in
IJHMA Philadelphia, PA by Asabere et al. (1994). In this study, the historic designation is associated
14,5 with a 24% price discount. Similarly, Heintzelman and Altieri (2013) find that home prices
were reduced by up to 15.5% after correcting the endogeneity issue in their investigation of
home values linked to the creation of historic districts in the Boston metropolitan area.
A smaller body of literature includes the indirect or external impact of designation on
property values of houses that are near or adjacent to a designated property or district
1094 (Ahlfeldt and Maennig, 2010; Been et al., 2016; Coulson and Leichenko, 2001; Diaz et al., 2008;
Franco and Macdonald, 2016; Lazrak et al., 2014; Moro et al., 2013; Narwold, 2008; Noonan,
2007; Noonan and Krupka, 2011; Schaeffer and Millerick, 1991; Tan and Ti, 2020; Zahirovic-
herbert and Chatterjee, 2012). A number of those studies draw cases from Asia, Europe and
North America to demonstrate that houses can have statistically significant price increases
because they are located near historic districts or adjacent to properties with historic
preservation designation. For example, Narwold (2008) suggests that housing prices are
likely to increase if there is a property within 250 ft registered in the Mills Act Program of
San Diego, CA. Franco and Macdonald (2016) find that the positive impact on property
values due to heritage amenities in Portugal may vary by typology and by the municipality.
Specifically, the authors estimate the price premium due to cultural heritage amenities
spillover is 3.3% and the effect dies off after 200 meters. Tan and Ti (2020) show a
consistently positive effect of proximity to urban heritage on property value in Singapore by
using panel data of housing transactions in 20 years. Their result also shows that the
positive effect tends to dissipate as the distance between the conserved site and the housing
continues to increase beyond certain thresholds.
However, some studies demonstrate that the preservation of a property or a district may
not necessarily create expected price increases of surrounding homes. Noonan (2007) reveals
that the price effect of distance to historic landmarks could become statistically insignificant
after controlling for community areas and when the model specification results in a positive
and statistically significant coefficient, this effect remains weak and may be attributable to
other factors. Noonan and Krupka (2011) present negative results concerning the external
effects of historic districts upon prices of houses in adjacent blocks. The fear of inclusion in
the future expansion of historic districts may trigger negative psychology among
homebuyers (Noonan and Krupka, 2011). Similarly, Li et al. (2018) find that the effects of
cultural heritage in Tainan City (Taiwan) on housing prices were mixed as one moved away
from the preserved site. In this research, the extent of negative and positive amenities vary
according to the type of cultural heritage which includes historic streets, national cultural
heritage and municipal cultural heritage. Unfortunately, it remains unclear why there exists
an inconsistent relationship pattern in the findings of those studies.

3. Study area
3.1 Overview of Ho Chi Minh City and the demand for housing
Ho Chi Minh City is an important economic hub with a high urbanization rate and an
increasing demand for housing in the South of Vietnam [1]. Its population has reached over 9
million in April 2019 (Vietnam’s General Statistics Office, 2019), making it the most
populous city in the country. Its economic profile shows that Ho Chi Minh City plays an
important role in the national economy with a growth rate of 8.3% compared to 2017,
reaching 57bn USD, contributing over 23% to national revenue. Rural migrants and those
from other provinces have come to the city to seek better education, work and life
opportunities, adding the number of 300,000 people to the city’s population annually.
Therefore, the new demand for housing each year is approximately from 80,000 to 100,000
units.
 Housing affordability remains a critical issue of the country and of Ho Chi Minh City. Historic
Given the population size, urbanization rate and demographic trend, the demand for housing landmarks and
is rising significantly in major cities across the country (Table 1). However, it has been
estimated that housing prices are beyond the income stretch of a majority of households
buildings
who pursue home-ownership (The World Bank Group, 2015). In Ho Chi Minh City, for
example, the minimum average salary in 2017 was US$5,465 per annum [2], however, the
lowest price of a two-bedroom condominium was approximately US $50,000 in 2017. The
government is struggling to provide formal housing solutions to address the problem, 1095
resulting in sub-standard housing and overcrowding conditions.
The city has a rich and diverse culture and history distinctly reflected in the main
architectural features of buildings and houses across its different districts. The city, which
was formerly known as Saigon, has gone through a remarkable succession of political and
economic regime changes in a course of over 300 years. The city’s inner core including
District 1 and 3 has a high concentration of museums and historic heritage sites. In its
colonial past, those districts served as the administrative center of French colonial Saigon,
which was maintained and reinforced through urban design, architecture and planning
(Wright, 1991). The west part of the city comprising District 5, 6 and 8 is the Chinatown
were Chinese immigrants chose to settle and built their cultural and communal centers A
number of the buildings in those districts dated to that era are still standing, attracting
domestic and foreign tourists (Figure 1).

3.2 The housing supply in the city

One salient feature of the housing supply in Ho Chi Minh City is its diversity in typologies
and participation. Housing across different categories may be further classified based on
their construction quality. The housing sector is composed of self-built houses of various
sizes and forms and those commercially built by private developers. Self-built houses, which
account for 75% of the housing stock, accommodate most low-income households and some
higher-income families (The World Bank Group, 2015). The commercial sub-sector which is
attracting both domestic and foreign investors and developers accounts for the remaining
25% of the housing stock but dominates the market in terms of data availability.
The self-built sub-sector in Ho Chi Minh City offers a range of quality and consists of
individual owner-sellers. Houses in most urban parts of the city can be categorized into three
main groups. The largest category includes tube houses or townhouses on roads and
alleyways in most parts of the city and does not have car access. Temporary and squatter
houses tend to be located in urban fringes where urbanization rapidly takes place. Villas on
individual lots tend to have high value and are situated in prime areas near the city center.
As average household income continues to rise, there has been an emerging trend of wealthy
people leaving the inner city for the suburb where they can buy larger lots of land for villas.
In this sub-sector, the owners tend to be the sellers and they may upgrade their properties
after a few years of owning them. They often make the decision to sell their properties to
move into a commercially developed unit in newly developed urban areas in the city which
tends to have the improved infrastructure. Some owners may have invested in several
properties, and therefore their decision to sell is based on the projected return of profit.

3.3 The process of selling townhouses

The actual transaction process of buying an existing townhouse in Vietnam is complicated
and can be less transparent to any outside parties such as the government and researchers.
The general process must follow the specific administrative regulation by the Ministry of
Construction (Circular No. 19/2016/TT-BXD of June 30, 2016) and include several steps and
 14,5

1096

Table 1.
IJHMA

thousand units
Number of urban

and national region

households by year

in Hanoi and Ho Chi

Minh City (HCMC) in
Urban Red river Northern midlands and North central and central Central South Mekong river
Year vietnam HanoiHCMC delta mountain coastal highlands east delta

2009 actual 6,470 715 1,441 1,572 521 1,155 362 1,952 932
2015 estimated 8,269 911 1,766 2,026 642 1,429 440 2,619 1,143
2020 forecast 10,138 1,123 2,084 2,507 759 1,698 515 3,358 1,350
Average annual
increase 374 42 64 96 23 54 15 148 41
Annual increase
(% total) 100 11 17 26 6 14 4 40 11
Source: The World Bank Group (2015)
 Historic
landmarks and
buildings

1097

Figure 1.
Locations of
townhouses and
historic buildings and
sites in Ho Chi Minh
City
IJHMA multiple trips made to the local agencies. Although both the buyer and seller abide by the
14,5 legal process, due to a lack of a centralized housing registration, certain important
information including actual transaction prices may not be disclosed. This problem is partly
attributable to the existence of the dual land price system, the mismanagement of
administrative procedures at the local level and the lack of proper coordination among
different government agencies in Vietnam’s housing sector.
1098 The process begins with buyers expressing their interest in properties to owners, which
may be facilitated via a real estate agency or an informal real estate agent who has the house
listing. Buyers then perform a check of the legal conditions of the house. Some of the
information can be obtained directly from the owners such as the land use right certificates
(LURCs), blueprints of the houses and construction permits. Due to the absence of an official
property record system, buyers often pay several visits to the property to examine its
physical conditions. Then, buyers must make additional trips to the local government
agencies to obtain planning information related to the properties and to check for any
disputes.
In the next step, buyers agree to buy the properties and pay the deposit and the total
property prices. The deposit contract between the two parties specifies the exact amount of
the deposit and the important dates to finalize the sale transaction. The deposit amount
which usually accounts for 10% of the property value can be made in cash or by wire
transfer. The deposit contract, therefore, contains the actual property price upon which the
deposit amount is estimated but this document remains informal and is only shared between
buyers and owners. To complete the sale, the two parties prepare the original copies of the
house and/or land document including the LURCs, receipts of land use fee payment and
the complete sale contract. At the notary office, the two parties sign the sale contract. To
evade tax and fees [3], both parties may agree to declare the price lower than the actual one.
In the final step of transfer and registration of title, buyers submit the complete dossier to
the local government to initiate the transfer and registration of title. The Department of
Land Administration is responsible for recording the transfer of ownership and land use
right title. A new LURC tied to the property is then issued to buyers.
As aforementioned, the seller and the buyer of real property in Vietnam can
evade personal income tax by disclosing a transaction price lower than an actual one on the
sale contract. A personal income tax of 2% is levied on the property price recorded in the
sale contract. Then, in case the property price is absent in the sale contract or that price is
lower than the land price officially issued by the government, the latter is used as a basis for
tax calculation. Because the market prices, which are always higher than official prices of
properties, are not acknowledged by the government, a declaration of an unusually low price
does not spark an investigation of the transaction. Therefore, the buyer and the seller have
incentives not to disclose the full transaction price of the real property to the third party. In
an unpublished study of this problem in 2018, the authors of the current research found that
only 4% of 1,000 sale contracts during 2015–2018 recorded transactions that may reflect
market prices. Unfortunately, the extent of difference between the declared transaction
prices and the actual ones remain unpredictable.

4. Methodology
Hedonic price models have been common in the research of environmental externalities on
housing prices. Over the years, scholars have improved those models by adding factors to
account for spatial autocorrelation among housing data (Carruthers et al., 2010; Diaz et al.,
2008). The basic reason underlying this argument is that houses in close proximity may be
structurally similar and buyers tend to buy houses in neighborhoods that share certain
similarities in terms of social and economic characteristics. This spatial autocorrelation Historic
warrants the modification of the hedonic modeling to take the new form, commonly known landmarks and
as a spatial autoregressive model (SAR), as follows:
buildings
y ¼ r Wy þ X b þ « ;


«  N 0; s 2 In (1)
1099
where y is a vector of N x 1, X is an (N x k) matrix, b includes the intercept and physical
characteristics of the house and the surrounding environment, W is a spatial weight matrix
that is built upon inverse distance relationship among all observations and is row-
normalized. The underlying rationale for this weight matrix is that houses within close
proximity will have higher dependence, and therefore a higher weight value and those that
are farther will have less weight value. r is the spatial lag coefficient.
The spatial econometrics literature also identified omitted variables as a possible cause of
spatial effects in the housing data (Anselin, 2007; LeSage and Pace, 2009). Housing prices in the
sample can be affected by additional unobservable factors such as location amenities which are
not readily captured by the variables included in the model. As prices are spatially correlated in
the error, the Gauss Markov assumption for OLS is violated. In this case, the spatial
autocorrelation that takes place in the error term needs to be accounted for to improve precision in
the estimation of the parameters. This spatial error model (SEM) can take the form as follows:
y ¼ Xb þ «
« ¼ l W « þ u;


u  N 0; s 2 In (2)
where l is the spatial autoregressive coefficient to be estimated.
The Spatial Durbin Model (SDM) includes a spatial lag of housing prices and the lags of
other independent variables in the model. This model tends to capture the effects of the
characteristics of the house on the prices of other houses in the sample. Theoretically, the
mixed model takes the form as follows:

y ¼ r Wy þ X b þ r W u þ « ;


«  N 0; s 2 In (3)

To test for spatial effects and select the appropriate model specification for the data set, the
authors follow both specific to general and general to specific approaches as proposed in earlier
similar studies on housing prices (Lazrak et al., 2014; Osland, 2010) and especially by LeSage and
Pace (2009). In specific to the general approach, the Moran’s I and the LM tests for the presence of
spatial dependence in the OLS model are conducted. In the general to a specific approach, the
authors start with the SDM and compare AIC, log-likelihood statistics with SAR and SEM.

5. Data collection
5.1 Property data
To conduct this study, the authors collected actual transaction price data in Ho Chi Minh City by
asking the buyers, sellers, brokers participating in the transactions, the notaries and authors
recorded at the end of 2018 and the first half of 2019. Because the process of property transaction
remains complicated and the housing price in transaction contracts are usually not factual data,
IJHMA the authors did not extract the data from an official database. However, this unique set of
14,5 transaction prices is the most reflective of the market and yet available to the authors at the time
of this study. The property data came from townhouse data for 12 districts in HCMC in 2018 and
2019. This data includes sale prices and structural characteristics of 274 attached units such as lot
size, the width of the house front and floor area.
Figure 2 shows the average sales prices of a townhouse across 12 districts in Ho Chi Minh
1100 City from June 2018 to June 2019 reported by Biggee.vn, a website based in Ho Chi Minh City
which provides real estate information. The general trend of average sales prices moved
upward in the period, marked by the highest rate of 25% increase in District 10 housing prices.
However, sales prices of townhouses in District 5 and Go Vap District slightly dropped in early
2019 and returned to the price level recorded as in the second half of 2018. When compared
with the sample, 88% of the transaction prices in this research are within the range of the
average market price by the district. Approximately 8% of townhouses are from District 5 and
appear to have transaction prices slightly less than the average market price for the district.
Meanwhile, 4% of the townhouses are in District 9 and reported transaction prices significantly
higher than the average district market price (20%).

5.2 Historic preservation data

The historic preservation data were provided by the Center of Architectural Research
at the Ho Chi Minh City’s Department of Planning and Architecture near the end of
2019. As a relic or building receives the title of the city’s historical or cultural heritage,

Figure 2.
Movement of average
sale prices of
townhouses in 12
districts of Ho Chi
Minh City during
June 2018–June 2019
the city is responsible for its maintenance expenses. By law, the designation of Historic
historical and cultural heritage, with or without architectural and artistic value, is landmarks and
considered for a building or relic that is associated with a historic event or incident
significant to the city or entire country. The designation process is lengthy and highly
buildings
bureaucratic which may extend for a number of years and be driven by political factors.
A site may not be considered formally as a historic and cultural heritage although it
meets architectural and historic requirements. This data set includes only buildings
1101
and relics that are formally designated by government decrees.

5.3 Variable measurement and empirical models

The preferred data set should include complete information related to property prices and
characteristics and preservation designation. Unfortunately, due to data availability, this
study combines the property data manually surveyed and the historic preservation data
from Ho Chi Minh City’s Department of Planning and Architecture. The current data set
allows for limited extraction of structural features of the house. Table 2 summarizes the
structural and locational variables, their units of measurement and their definitions. The
dependent variable is the transaction price of attached townhouses in 2018–2019
transformed in natural logarithm. This Euclidean distances to the city CBD and nearest the
historical building are measured in kilometer.
While it has been acknowledged that housing morphology in Vietnam is diverse and
complex (The World Bank Group, 2011), a more rigorous examination of its various
structural characteristics is absent in the literature. The current study, perhaps,
remains as the first attempt to unbundle the housing characteristics which may affect
the willingness to pay in this respective real estate market. In addition to structural
variables including land lot and floor areas commonly used in hedonic studies (Ahlfeldt
and Maennig, 2010; Been et al., 2016; Franco and Macdonald, 2018), the authors use two
variables that are considered as important in the market for single-family houses in
Vietnam. They include the width of the house front and a dummy variable that
indicates whether the house is situated on the corner lot. Both variables capture
possible irregular shapes and forms of landed properties in traditional and new
development and the latter may capture the possible corner lot effect on property value
(Angjellari-Dajci and Cebula, 2016; Been et al., 2016; Gordon et al., 2013; Larsen and
Peterson, 1987).
Studies on spillover impact of historic preservation often include locational and
neighborhood characteristics of the properties to control for the substitutability of the
location amenities such as distances to the central business district or city CBD, transit stops
and stations, waterfront and community features or facilities (Ahlfeldt and Maennig, 2010;
Diaz et al., 2008; Lazrak et al., 2014; Noonan, 2007; Noonan and Krupka, 2011). Following this
literature, the authors of this current study use the distance to the city CBD and a dummy
variable to capture the effect if the house is located on the main street (Lazrak et al., 2014). In
the context of Ho Chi Minh City, the owner of a house situated on a busy street, which is
often the main street, may reap higher rents or take advantage of its prime location for retail
or office opportunities. For that latter reason, the authors add a dummy variable to indicate
whether the house is being rented for commercial purposes. A typical townhouse in a mixed-
use neighborhood can be rented to be used as a retail shop, which is common in older areas
of the city. Based on recent observations of the Ho Chi Minh City property market, the
authors assume that houses being used as retail shops tend to have higher values that those
which remain as residences [4].
IJHMA Variables Unit Definition
14,5
Dependent variable
LnPrice Bil. VND Transaction price of residential properties in 2018–2019
transformed in natural logarithm
Explanatory variables
1102 Structural characteristics
LnLot Squared meter Land lot size transformed in natural logarithm
LnFloor Squared meter Total floor area transformed in natural logarithm
Width Meter Width of house front
Corner Dummy 1 if house located at a street corner, 0 if others
Year Dummy 1 if house transaction was in 2018, 0 if in 2019
Locational and neighborhood characteristics
RentalProp Dummy 1 if the house is being rented for commercial purpose, 0 if
it is being used as a residence
Mainstreet Dummy 1 if the house is on the main street, 0 if a house is in an
alleyway. The main street is defined following the
construction standard by the government (QCVN 07–
4:2016/BXD)
CBD Kilometer Distance to CBD (Ben Thanh market)
Historic preservation amenities
Dist_HB Kilometer Distance to nearest designated historic/cultural structure
or site
Table 2. Dist_HBsqr Kilometer Square of Distance to nearest designated historic/cultural
Variable definitions structure or site

Tables 3 and 4 report descriptive statistics for the data and correlation matrix of the
variables. Among 274 transactions of townhouses during 2018–2019, the lowest reported
price is VND 2bn or around the US $87,000 and the highest price is VND 75bn or
approximately US $3.2m. The lot size ranges from 7.2 to 534.3 squared meters. The average
house front width is about 4.7 meters, consistent with the standard townhouse morphology
in Vietnam. The longest distance from a house to the CBD is 19.9 kilometers for a property
located in District 9, a suburban district. The shortest distance from a house to a designated
historic building or landmark is 20 meters and the longest one is more than 2.5 km.
According to the results of the correlation coefficient matrix of variables, the correlation
coefficient between pairs of independent variables in the model is relatively small. The

Variable Obs Mean SD Minimum Maximum

Price 274 14.709 11.196 1.9 75

Lot 274 78.945 62.490 7.2 534.3
Floor 274 240.306 422.507 15 5280
Width 274 4.699 2.276 2.5 19.5
Corner 274 0.839 0.277 0 1
CBD 274 5.631 3.124 0.13 19.9
RentalProp 274 0.324 0.469 0 1
Mainstreet 274 0.145 0.353 0 1
Table 3. Dist_HB 274 0.636 0.494 0.020 2.890
Descriptive statistics Year 274 0.905 0.293 0 1
 Historic
Variable Lnprice Lnlot Lnfloor Width Corner CBD RentalProp Mainstreet Dist_HB Year landmarks and
Lnprice 1 buildings
Lnlot 0.69 1
Lnfloor 0.66 0.73 1
Width 0.38 0.51 0.42 1
Corner 0.09 0.05 0.03 0.17 1
CBD 0.12 0.32 0.14 0.03 0.01 1 1103
RentalProp 0.33 0.12 0.12 0.08 0.04 0.08 1
Maintreet 0.12 0.07 0.06 0.01 0.13 0.08 0.22 1 Table 4.
Dist_HB 0.05 0.33 0.23 0.09 0.04 0.58 0.01 0.07 1 Correlation matrix of
Year 0.002 0.09 0.03 0.01 0.08 0.11 0.01 0.09 0.05 1 variables

correlation coefficients range from 0.01 to 0.70, no correlation coefficient is greater

than 0.8.
Different scholars raised the potential issue of a non-linear association between the
environmental factor of interest and property prices (Das and Roy, 2014; Noonan, 2007; Won
and Lee, 2018). For example, Won and Lee (2018) use spatial hedonic modeling techniques to
investigate rent determinants in Seoul, Korea and find that rents decrease as one moved
away from the CBD. However, this effect fades once the distance reaches a certain point.
They assume that the spillover effect of historic designation if exists, might not extend to
infinity.
Following those earlier studies, the authors of the current study considered for the
benchmark hedonic model the non-linear relationship between and the property price and
the distance to the nearest site with the designation. This model also controls for district
fixed effects to remove any location amenities which may generate premiums on prices of
housing. The basic log-linear hedonic model will take the form as follows

LnPrice ¼ b 0 þ b 1 LnLot þ b 2 LnFloor þ b 3 Corner þ b 4 Width þ b 5 RentalProp

þ b 6 Mainstreet þ b 7 DistC BD þ b 8 DistH B þ b 9 DistH Bsqr þ b 10 Year þ e
(4)

Location fixed effects are applied for District 1, District 3, District 5, District 6, District 9,
District 10, District 11, Go Vap District, Phu Nhuan District, Tan Binh District and Tan Phu
District. Binh Thanh District is used as the reference.

6. Findings
A series of Moran’s I and LM tests are carried out on the residual of the base hedonic model
using the inverse distance weight matrix and report the results in Table 5. The test statistics
indicate a significant presence of spatial autocorrelation despite the district fixed effects
being controlled for. Due to the possible serial correlation among the properties, the usual
OLS standard error is no longer valid and cannot be used for inference (LeSage and Pace,
2009). The LM error, LM lag, robust LM lag and SARMA test statistics are significant but
the robust LM lag is not statistically significant, suggesting that the spatial lag model is the
ideal one.
The general to specific procedure requires starting by fitting the Spatial Durbin model to
the data. Table 6 compares the performances of all models, their spatial parameters
IJHMA and their important test statistics across the OLS, SDM, SEM and SAR models. Table 6
14,5 shows that r of the SDM model is not statistically significant at any level, confirming the
LM test for the spatial lag, suggesting the SEM as the appropriate model. Comparison of the
AICs for all three models SDM, SAR and SEM models and conducting the likelihood ratio

1104 Test Statistics p-value

Moran I’s 3.958 0.00

Table 5.
LM error 3.208 0.07
Results of Moran I’s LM lag 6.304 0.01
and Lagrange Robust LM error 0.040 0.84
Multiplier Robust LM lag 3.137 0.08
diagnostics SARMA 6.345 0.04

OLS model SDM SEM SAR model

Coef. t-stat Coef. z value Coef. z value Coef. z value

Intercept 1.10*** 4.9 1.89 1.2 0.68*** 3.3 2.49*** 6.3

Lnlot 0.64*** 11.3 0.64*** 11.9 0.64*** 11.5 0.63*** 11.4
Lnfloor 0.20*** 5.1 0.22*** 5.7 0.22*** 5.4 0.22*** 5.7
Corner 0.10 –1.3 0.12 –1.5 0.09 –1.3 0.10 –1.3
Width –0.01 –0.6 –0.01 –1.3 –0.01 –0.8 –0.01 –1.1
RentalProp 0.25*** 5.7 0.24*** 5.6 0.24*** 5.6 0.23*** 5.4
MainStreet 0.10 1.3 0.07 1.1 0.08 1.3 0.08 1.4
Dist_CBD –0.05** –2.5 –0.05*** –3.1 –0.06*** –6.8 –0.06*** –7.3
Dist_HB 0.26** –2.0 0.29* –1.9 0.38*** –3.1 0.41*** –3.6
Dist_HBsqr 0.10* 1.8 0.07 1.1 0.16*** 3.2 0.16*** 3.6
Year 0.05 –0.7 –0.12* –1.7 0.11* –1.7 0.10 –1.4
lag.Lnlot 0.12 –0.3
lag.Lnfloor 0.29 0.8
lag.Corner –0.77 –1.3
lag.Width –0.16* –2.2
lag.RentalProp 0.31 –0.8
lag.MainStreet 0.95** 1.8
lag.Dist_CBD 0.11 –1.6
lag.Dist_HB –0.97 –1.0
lag.HBsqr 0.86 1.9
lag.year 0.44** 0.9
Adjusted R2 0.73
Rho 0.47 0.71***
Lamda 0.81***
Log-likelihood 71.2 81.34 80.90
AIC 188.4 188.7 187.8
Sample size 274 274 274 274
LM test for residual 0.05 2.36
autocorrelation
Table 6.
Notes: *Statistical significant at 0.1 level; **Statistical significant at 0.05 level; ***Statistical significant at
Comparison of the 0.01 level. n = 274. Coefficients are estimated from OLS, SDM, SEM and SAR models. The dependent
OLS, SDM, SEM and variable lnprice is the log form of the transaction price of townhouses in millions of VND. Independent
SAR models variables are all standardized. p-value based on t-statistics and z value in each column
test for the SDM and SEM (Likelihood ratio = 20.288, p-value =0.026) point out that the SEM Historic
appears as the appropriate model for interpretation. However, the test statistics of both SEM landmarks and
and SAR models are close, indicating that one must not exclude one model in its entirety.
Table 6 shows that the coefficients of distance to nearest historic buildings and sites are
buildings
statistically significant and have the same magnitude in both the spatial error and spatial
lag model specifications. The spatial parameter Lambda of the SEM model indicates a high
level of spatial autocorrelation among the error terms. This unexplained spatial variation
can be attributable to omitted variables such as location amenities where the houses are
1105
situated. For example, public and community venues and facilities such as parks, greeneries,
schools and gyms are not evenly distributed in the city. Therefore, access and distances to
those places may create amenities for property owners in the city. In the SAR model, the
high value of Rho may suggest a high level of spatial lag among housing prices which once
controlled for does not confound the relationship between housing prices and distance to
the site with the designation. A possible factor to account for the above spatial
autocorrelation is those city dwellers in the past tended to flock together by economic
activities, which are spatially related.
Among the housing attributes, the land lot size and total floor area have their expected
signs and are statistically significant at p < 0.01. For every 1% increase in the total land lot
and floor area, property prices increase by 0.63% (SEM) or 0.64% (SAR) and 0.22%,
respectively. This result is consistent with the recent international literature on the housing
market (Diewert and Shimizu, 2016; Lazrak et al., 2014; Xiao, 2017). Unfortunately, contrary
to the earlier belief of how the real estate market works in Vietnam, the width of the property
front (Width) and the corner lot dummy (Corner) are not statistically significant in both SEM
and SAR models. Perhaps, the sample of landed single-family houses in this study does not
represent the city’s housing stock in terms of morphology and the houses may be somewhat
more homogeneous than commonly found.
Among the locational and neighborhood characteristics, only the distance to the central
business district (CBD) and whether the property was being rented for commercial purposes
(RentalProp) have the expected signs and are statistically significant. Specifically, the
commercial use of a house adds a significant premium of 23–24% to the price of the
townhouse compared to a house being used only as a residence. This result has not been
empirically tested before but it follows the intuition about the demand for properties that
can be turned into coffee shops, restaurants and retail venues. In other words, the property
owner would like to have a substantial premium on the property price if the house is being
rented and used partly as a shop. However, MainStreet, a dummy variable intended to
capture busy commercial street effects, is not statistically significant. This is, perhaps, due
to the possible specification error of the variable as one may have different ways to define
the main street. In this current study, the categorization of the main street is necessitated by
regulatory approval of the city government based on the physical characteristics of the road.
The coefficients on Dist_CBD are statistically significant and negative and have the
same magnitude in both SEM and SAR models. As properties are located 1 kilometer farther
from the CBD, their sale prices were likely to drop by 6.0%. This result is similar to findings
of earlier housing studies that showed a downward sloping housing price curve with
distance from the CBD (Asabere and Huffman, 1994; Bayer et al., 2011; Diaz et al., 2008;
Gilderbloom et al., 2009; Heintzelman and Altieri, 2013; Lai and Lombardini, 2016; Noonan
and Krupka, 2011; Osland, 2010; Won and Lee, 2018). Furthermore, this result suggests that
the developing city remains to be a monocentric one, consistent with earlier observation and
the theory (Brueckner, 2011; The World Bank Group, 2011).
IJHMA
14,5

1106

Figure 3.
Comparison of
housing morphology
in Ho Chi Minh City

As the aim of this research is to explore the external impact of historic preservation on
housing prices, the authors examine the coefficients of Dist_HB and Dist_HBsqr. The SEM
model indicates that the coefficients on Dist_HB and on Dist_HBsqr are significant and
have opposite signs. The distance to the nearest historical building or landmark is negative,
suggesting that houses located farther away from the designated site experience price drops.
This finding corroborates other studies, which found positive externalities of historic
preservation on the prices of nearby properties (Been et al., 2016; Coulson and Leichenko,
2001; Lazrak et al., 2014; Moro et al., 2013; Narwold, 2008; Noonan, 2007; Noonan and
Krupka, 2011; Schaeffer and Millerick, 1991). However, the squared term of distance is
positive, allowing us to have an additional interpretation about the relationship between
distance to historic preservation sites and property values. As this distance increases,
townhouse prices decrease but at a decreasing rate and this positive externality fades out at
a certain threshold distance. The authors can also take the derivative with respect to the
distance to derive the turning point of the relationship, which is 1.19 kilometers and 1.28
kilometers for the SEM model and SAR model, respectively.
The high coefficient values of distance to historic preservation sites are interesting
but deserve some caution in their interpretation. The direct impact of a one-kilometer
increase in the distance to the historical site from a particular house is a drop of 6.0%
(SEM) or 9.0% (SAR) in its transaction price. For comparison, housing prices drop on
average by 6.0% for every one-kilometer increase in distance to CBD. For example,
Franco and MacDonald (2018) find the spillover benefits of preservation to be only
3.3%. Although the correlation between the two distance variables may not be ruled out Historic
(Table 6), there are other possible explanations. The distribution of housing is skewed landmarks and
towards the central district of the city, abundant with historic sites perhaps of high
quality, therefore buyers may value historic preservation differently than those living
buildings
in city periphery (Franco and Macdonald, 2018). Another possible confounding factor is
the unaccounted quality of the designated historic preservation sites, and not the
designation itself may be the source of such a high coefficient value in this context as
discussed elsewhere in the literature (Noonan and Krupka, 2011). 1107
Various scholars treat the robustness issue related to how the external effects of historic
preservation wear off. For example, Tan and Ti (2020) design a system of proximity zones
for buildings and the conserved sites such that one building can fall into more than one
proximity zone. In this current study, the authors create three dummies for distances
between the property and the preservation site of fewer than 500 meters, from 500 meters to
1,000 meters and over 1,000 meters and re-run the models. Unfortunately, the distance
dummy variables are not statistically significant, which may be caused by the sample
distribution and size, and therefore require more refined categories of distance and
additional collection of data.

7. Conclusion
This study sheds light on the external impacts of historic preservation on property prices in
Vietnam. The authors contribute to the literature by using the unique data set for Ho Chi
Minh City in analyzing the effects and controlling spatial autocorrelation among the
observations. In an economy with incomplete property rights, the historic and cultural
heritage sites in Ho Chi Minh City still generate benefits to property owners of nearby
townhouses. Those benefits reflected by a price premium affect the demand side of the
housing market as historic preservation does not restrict real estate development or supply,
in the area. Significantly, the findings also add to the existing literature as the external
impact of a historic building or site has been shown to fade after a certain point in the
distance as one moves further from the site. While the exact reason why this point exists
remains unknown, it is possible that the relationship between distance to historic
preservation and housing prices takes an inherent non-linear association.
The study has certain caveats in data collection and model specification which
admittedly restricts general interpretation and policy implications. Ideally, the property
price data should come from a source with established creditability and be observed over a
longer period of time with repeated sale prices. In the specific context of Vietnam’s real
estate market and regulation, the researchers have to manually survey and collect housing
data. The specification of the non-linear association needs to be more robust with different
formulations of the distance between the studied properties and the recognized sites and
structures. Then, finally, the researchers should consider collecting additional information
about the designated structures and buildings to tease out the effect of their features and
characteristics versus their titles.
For the Vietnamese government, the study has implications for real estate legislation and
administration. The existing land ownership and property rights regime do not allow the
land and property markets to operate at their highest efficiency level. Without a correct
market signal, the government must relinquish the economic spillovers from publicly-
funded historic preservation which then accrue only to the buyer and seller. The benefits of
historic preservation can only be effectively obtained if real estate transactions are
transparent and properly taxed. This argument is in line with the existing call for legislative
reforms in land ownership, land use and property rights. In particular, the government
IJHMA should consider discontinuing the nominal land price system to establish a formal
14,5 recognition of land market prices in all transactions.

Notes
1. www.bloomberg.com/news/articles/2019-02-18/manhattan-luxury-comes-to-one-of-asia-s-
hottest-property-markets
1108
2. Vietnam General Statistics Office’s Economic Census of 2017.
3. Personal income tax at 2% of sale price.
Fee for title registration at 0.5% of construction price issued by the government.
Evaluation fee of 0.15%.
4. In a CBRE report released in 2019, prices of shophouses in Vietnam rose by 261% in the
secondary market while villa prices only rose by 35–37% during 2014–2019. The report was
accessed on October 10, 2020 at http://cbrevietnam.com/Vietnam-Property/experts-caution-
against-investing-in-shophouses.cbre

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Further reading
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Corresponding author
Doan Nguyen can be contacted at: doannlb@ueh.edu.vn

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