In metropolitan areas worldwide, abandoned properties are prevalent, prompting a need for small urban green spaces (SUGS) to meet the growing demand. Understanding residents’ preferences and perceptions of transformed spaces is vital for effective urban design. This study delves into residents’ preferences and perceptions regarding the transformation of such spaces into SUGS and their impact on psychological well-being. By examining how these preferences and perceived health benefits shape the value of transformed spaces, the research aims to inform effective urban design strategies. The participants underwent visual stimulation, with psychological reactions recorded through Electroencephalogram (EEG) readings and assessed via Questionnaire. Machine learning techniques analyzed EEG sub-band data, achieving an average accuracy of 92.8% when comparing leftover and designed spaces. Results revealed that different types of transformed spaces provoke distinct physiological and preference responses. Specifically, viewing SUGS was associated with significant changes in gamma wave power, suggesting a correlation between enhanced gamma activity and increased feelings of empathy. Moreover, participants also reported enhanced comfort, relaxation, and overall mood, and a strong preference for SUGS over untransformed spaces, emphasizing the value placed on these areas for their health benefits. This research highlights the positive impact of even SUGS on mental health, using EEG data to assess emotional states triggered by urban spaces. The study concludes with a call for further research to investigate the long-term benefits of SUGS on well-being, alongside an exploration of the gamma band as a neural marker for emotional restoration in urban green spaces. This research highlights the crucial role of urban design in fostering psychological well-being through the strategic development of green spaces, suggesting a paradigm shift toward more inclusive, health-promoting urban environments.