Analysis of the asymmetric effect of air pollution on housing prices in Iran (using the NARDL approach)

Document Type : Research Paper


1 Department of Economics, Faculty of Management and Economics, Science and Research Branch, Islamic Azad University, Tehran, Iran

2 Faculty of Economics, Allameh Tabatabaei University, Tehran, Iran


Given the expansion of cities in recent decades, it is necessary to address environmental problems such as air pollution and study its impact on the economy. One of the most important sectors of the economy in which the environmental effects are very evident is the housing sector. The importance of housing is such that has always been introduced as one of the main human needs. However, the increase in housing prices in recent years and the high cost of services, in the housing sector, have led to little attention being paid to consumer tastes and preferences, including clean air, in housing construction. Therefore, considering the importance of air and housing pollution, the purpose of this article is the asymmetric analysis of the effect of air pollution on the housing price index in Iran. In this regard, the macroeconomic model was used in which the variables of air pollution index, per capita income, liquidity, consumer price index, interest rate and exchange rate were used as explanatory variables for the dependent variable of the housing rent index. The model was estimated using annual data over a period of time (1996-2017) for the Iranian economy and using the Nonlinear Autoregressive Distributed Lag Method (NARDL). The NARDL technique is able to examine the effect of positive and negative air pollution shocks in the short and long term separately on housing prices. It should be noted that the indicator used to express air pollution is (PM2.5). The results of the estimate indicate the fact that each negative shock of air pollution leads to an increase in rent and each positive shock of air pollution leads to a decrease in rent. Estimates also show that per capita income is the most effective variable on housing prices, while interest rate and liquidity had no significant effect on housing prices.


[1] M. Abbaspour and V. Kalantar Chahouki, Simulation of the mechanism of emission of polluted gases in the environment and investigation of the parameters of this phenomenon, Second Nat. Seminar Assoc. Envir. Specialists, 1998.
[2] M. Aghapour Sabbaghi, Investigating the effect of healthy air on the price of residential houses in Tehran in 2008, Quart. J. Iran. Sci. Assoc. Envir. Health 14 (2011), no. 2, 213–222.
[3] A. Amini Behbahani and K. Nafari, Air pollution, housing prices, and costs of sanctions: A natural experiment, University of Illinois at Urbana-Champaign, Department of Economics, 2017.
[4] M.A. Azar, Tehran air pollution causes, Programming and Labor Education Assistance, Bahonar High Education Center, 2002.
[5] A.S.M. Azmi, R.F. Azhar and A.H. Nawawi, The relationship between air quality and property price, Proc. Soc. Behav. Sci. 50 (2012), 839–885.
[6] F. Carriazo-Osorio, Impacts of air pollution on property values: An economic valuation for Bogota, Colombia, 2nd Workshop on Population, Economy and the Environment: Modeling and Simulating their Complex Interaction at the Max Plant Institute for Demographic Research, Germany, 2001, pp. 16.
[7] K.Y. Chay and M. Greenstone, Dose air quality matter? Evidence from the housing market, J. Politic. Econ. 113 (2005), no. 2, 376–424.
[8] V. Chiarazzo, P. Coppola, L. Dell’Olio, A. Ibeas and M. Ottomanelli, The effects of environmental quality on residential choice location, Proc.-Soc. Behav. Sci. 162 (2014), 178–187.
[9] M.S. Ejlali, Investigating the effect of clean air on housing prices in Tehran by Hadanik method, Master Thesis, Central Tehran University, 2011.
[10] A. Emami Meybodi, A. Azami and E. Haghdoost, Investigation of environmental factors affecting the price of residential houses in Tehran by Hadanik method, J. Econ. Res. 44 (2009), no. 87, 27–52.
[11] A.A. Gholizadeh, Housing price theory in Iran, Noor Alam Publications, Hamedan, 2008.
[12] M. Greenwood-Nimmo, V.H. Nguyen and Y. Shin, International linkages of the Korean economy: The global vector error-correcting macroeconometric modelling approach, Melbourne Institute Working Paper, 2012, no. 18.
[13] X. Huang and B. Lanz, The value of air quality in Chinese cities: Evidence from labor and property market outcomes, Envir. Resource Econ. 71 (2015), no. 4, 849–874.
[14] A. Iman, N.H. Hamidi and S. Liew, The effects of environmental disamenities on house prices, Malay. J. Real Estate 4 (2009), no. 2, 31–44.
[15] A. Jafari Samimi and Z. Elmi, Zahra and A. Hadizadeh, Factors affecting the behavior of housing price index in Iran, Iran. Econ. Res. Quart. 9 (2007), no. 32, 31–53.
[16] F. Laden, J. Schwartz, F.E. Speizer and D.W. Dockery, Reduction in fine particulate, air pollution and mortality: Extended follow-up of the Harvard six cities study, Amer. J. Respir. Critic. Care 173 (2006), no. 6, 667–672.
[17] S. Madanloo Joybari, Investigating the effect of economic growth (GDP growth per capita) on pollution growth (carbon dioxide, particulate matter and nitrogen oxides), Master Thesis, Al-Zahra University, 2011.
[18] R. Minguez, G. Fernandez-Avil´es and J.M. Montero, Does air pollution affect the price of housing? A joint geostatistics and spatial econometric perspective, Int. Conf. Dev. Energy Envir. Econ., 2010, pp. 327–332.
[19] T. Oveysi Fardavi, Estimation of housing demand function using hedonic price model (case study of Qom city), Master Thesis, University of Science and Research, 2012.
[20] T. Panagiotidis and P. Printzis, On the macroeconomic determinants of the housing market in Greece: A VECM approach, Int. Econ. Econ. Policy 13 (2016), no. 3, 387–409.
[21] H. Parash Manzeh, Estimating the recreational value of Tehran’s parks using the CVM conditional valuation method, a case study of areas 3 and 17, Master Thesis, University of Science and Research, 2006.
[22] H.H. Pesaran and Y. Shin, Generalized impulse response analysis in linear multivariate models, Econ. Lett. 58 (1998), no. 1, 17–29.
[23] P.C. Phillips and B.E. Hansen, Statistical inference in instrumental variables regression with I(1) processes, Rev. Econ. Stud. 57 (1990), no. 1, 99–125.
[24] S.K. Sadeghi, R. Khosh Akhlaq, M. Emadzadeh, R. Dalali Esfahani and M. Nafar, The impact of air pollution on housing value (case study: Tabriz metropolis), Iran. Econ. Res. Quart. 12 (2008), no. 37, 171–192.
[25] P. Saikkonen, Asymptotically efficient estimation of cointegration regressions, Economet. Theory 7 (1991), no. 1, 1–21.
[26] M. Tang and D. Niemeie, How does air pollution influence housing prices in the bay area?, Int. J. Environ. Res. Public Health 18 (2021), 12195.
[27] A. Yusuf and B. Resosudarmo, Dose clean air matter in developing countries mega cities? A hedonic price analysis of the Jakarta housing marke’s Indonesia, Ecol. Econ. 68 (2008), 1398-1407.
[28] H. Zanjani, Population and development, Collection of Articles, Iran Urban Planning and Architecture Studies and Research Center, First Edition, 1992.
[29] E. Zavadskas, A. Kaklauskas, J. Saparauskas and D. Kalibatas, Vilnius urban sustainability assessment with an emphasis on pollution, Ekologija 53 (2007), 64–72.
[30] L. Zhang and H. Zheng, Public and private provision of clean air: Evidence from housing prices and air quality in China, Available at SSRN:
Volume 14, Issue 7
July 2023
Pages 233-242
  • Receive Date: 05 August 2022
  • Revise Date: 25 September 2022
  • Accept Date: 13 October 2022
  • First Publish Date: 25 October 2022