The Impact of Luxury Housing on Neighborhood Housing Prices in Taipei City

Abstract

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.

The Impact of Luxury Housing on Neighborhood Housing Prices: An Application of the Spatial Difference-in-Differences Method

“…In addition to the external effects of housing, Hsu (2005) suggested that individual housing needs can also increase the BIRG phenomenon due to surrounding community characteristics; this involves location-, brand-, and quality-related cognition dimensions, all of which produce the neighborhood effect of luxury housing. The results corresponded to those reported by Ooi and Le (2013), François et al (2002), Tang and Yao (2012), and Lee et al (2018), that is, new constructions in neighboring areas are attractive and produce a positive effect. For example, the Olympics increased housing prices in Beijing that were particularly high in the periods close to the opening of the Olympics.…”

“…The results showed that factors relating to the Olympics resulted in a progressive increase and subsequent decrease of neighboring real estate prices, whereas in cities outside the influence of the Olympics, real estate prices changed in line with the economic cycle. Lee et al (2018) examined the difference in housing prices within and outside the areas neighboring luxury housing. The experimental group included an area within 500 meters of luxury housing and the control group included areas outside this range.…”

“…Liang (2009) compared spillover effects of urban redevelopment projects and used a 500-meter radius to distinguish between the research and control areas. Lee et al (2018) analyzed housing prices within the neighborhood range of luxury housing; the experimental group included houses within 500 meters form luxury housing and the control group included houses outside this range. In this study, houses located within 500 meters from luxury housing were included in the experimental group and those located outside this range were included in the control group.…”

“…The effect of luxury housing on housing prices within and outside 500-meter range was investigated. Lee et al (2018) examined the difference in housing prices within and outside the luxury housing range, determining areas within 500 meters from luxury housing as the experimental group and areas outside the 500-meter range as the control group. François et al (2002) found that in Quebec City, Canada, beautiful streetscape can increase housing prices by 4.4%.…”

“…Most have investigated the effects of large-scale public infrastructure development projects or large-scale housing development projects on housing prices nearby. Recently, Lee et al (2018) investigated the effects of the announcement and the completion of luxury housing on nearby housing prices by adopting the DD approach for estimation.…”