The plan put forward by Loreto 2025 shows a markedly different impact on land prices, as seen in Figure 27. In this alternative, development is permitted on a much smaller proportion of the land in the areas of highest demand. This produces a relatively higher increase in land value for these areas. Accordingly, there are more areas that suffer from a drop in property values as a result of development restrictions. This analysis highlighted the political difficulty decision-makers would face in limiting development.

A separate evaluation of the impact of changing land use patterns on land values is based on the results of the survey of residents in the United States. The survey asked potential homebuyers to choose among different housing choices that differed in price, the views from the house, and characteristics of the region, after survey respondents were introduced to the Loreto region with photographs and text. The evaluation is based on conjoint analysis, where a hypothetic market is created to replicate, to the greatest extent possible, the choices that consumers would make in a real marketplace.


Five attributes where included in the choice sets:

• the view from the house towards the ocean
• the view from the house towards the mountains
• the view of the road between the house and the urban center
• an aerial view of the region
• the price of the house

The statistical analysis of the reported preferences allows us to make inferences about the approximate difference in value among the different attributes. For the views towards the ocean, the unobstructed view (View 1) is worth on average $90,000 more than the partially obstructed view (View 2), and $150,000 more than View 3.

The difference in the value of views towards the mountains is not as high. View 1 is worth approximately $70,000 more than View 2, and $90,000 more than View 3.

The difference in the views from the road is not statistically significant. Of the five factors, this appears to be the least important.

The density of the region did have a statistically significant impact on housing preferences. View 1 is valued at approximately $70,000 more than View 2, and $160,000 more than View 3.

These results indicate that as density increase, the value of existing housing declines. This should not be confused with the movement in prices that result from other factors that influence property values, such as improvements in transportation, job creation, or real estate marketing efforts. In a housing market that experiences rising housing prices, the impact would be a relative decline (comparing real estate values to what would have occurred otherwise) and not absolute decrease in property value.

Using the results of this study, we have created an indicative model of the relative impact on real estate prices in the high-end market in Loreto as the quantity of housing in creases in the area. Again, this does not take into account the myriad of factors that can sway real estate prices in the future. This only looks at the impact of changes in the total number of houses on the landscape as interpreted by the stated preferences of potential homebuyers. This analysis does not include the impact of these changes on the value of the lower and middle segments of the housing market in Loreto.

Assuming an average home price of $350,000 and starting with 200 homes, the estimated decline in the average price of housing is shown in Figure 32. This suggests that existing omeowners will experience a relative decline in property values as additional houses are added the market. This phenomenon is widely accepted as one of the principal factors that motivate communities to limit growth. In Loreto, where investments by foreigners in real estate are likely to drive future growth, this could be a more fundamental indicator of the health of the economy.

More than reducing the relative value of existing homes, this simple model also exhibits how the aggregate value of this segment of the housing market can decline with increasing numbers of houses.