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This study investigated whether a decision to construct luxury housing can help increase neighborhood housing prices. The difference-in-difference method was used in the analysis. Housing transaction data from 2008 to 2011 were used in the analysis. According to the empirical results, after eliminating the common growth in prices (10.6%) between the neighborhood in which luxury housing was to be built and the other non-luxury neighborhood, the real gap in the housing prices caused by the luxury housing was 11.2%. This suggests that luxury housing has spillover effects on neighborhood housing prices and, specifically, can help to increase neighborhood housing prices. Furthermore, the results showed that housing prices in the neighborhood in which the luxury housing was to be built were inversely proportional to the distance from the luxury housing. Contribution/ Originality: This suggests that luxury housing has spillover effects on neighborhood housing prices and, specifically, can help to increase neighborhood housing prices. Furthermore, the results showed that housing prices in the neighborhood in which the luxury housing was to be built were inversely proportional to the distance from the luxury housing.

This study investigated the spatial spillover effects of luxury housing during and after construction, in regards to increases in housing prices in neighboring areas as well as the spatial dependence of neighboring housing. This study focused on already completed luxury housing in Taipei, Taiwan. First, the nearest-neighbor matching approach of propensity score matching was used to overcome the problem of data heterogeneity. The difference-in-differences (DD) method and spatial econometrics were used for analysis. The empirical results indicated that the spatial error model had the best goodness of fit. This indicated that housing prices increased by 13.0% during construction of luxury housing nearby. This indicated that housing prices increased by 5.8% after the construction of luxury housing nearby. The empirical results showed that the ongoing and completed construction of luxury housing had spillover effects on housing prices. The effect of ongoing construction of luxury housing was particularly large in scope, indicating its role as a predictor of psychological reaction in the market.