The Spatial Pattern of Urban Land Prices Determination in Indonesia: The Case of Surabaya, East Java

This paper aims to examine the determinants of land prices linked to the spatial pattern of urban area in one of the largest city in Indonesia that is Surabaya. By using market-prices approach, this research incorporates 14 spatial variables and 4 non-spatial variables. The findings indicate that proximity to city centre is still significant in determining land prices in Surabaya. It fits with empirical findings from previous study such as Boston Dallas and Jakarta. Nevertheless, the R-squared of land prices and CBD is quite small indicating the urban structure in this city likely follow the polycentric city or multinuclei city. It also confirms that there is a decentralisation in urban economic activities in Surabaya. Due to multicollinearity problem, regression in this research using four principal components. The result show that there are four significant independent variables which are first principle component (central area), fourth principle component (outer area), zoning for industry and collector road. Beside outer area, all the results can be supported by the descriptive analysis and previous studies. It is likely because the second component the consist of variables that tend to fall and rise with distance. In addition, land prices in central area tend to decline with distance. In term of zoning, industrial area has negative sign implying that this zoning has lower prices compared to trading/service zone. Coefficient for collector road has positive sign indicating that land plot in front of this road is appreciated higher values than located near local road.