The effect of architecture on housing prices

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Journal Title

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Volume Title

Insinööritieteiden korkeakoulu | Master's thesis

Date

2020-08-17

Department

Major/Subject

Mcode

Degree programme

Master's Programme in Real Estate Economics (REC)

Language

en

Pages

56

Series

Abstract

Architecture has a long-term effect on our living environment due to its highly durablenature. It affects both the liveability and sustainability of our built environment. As thearchitecture of residential buildings is increasingly homogenous, it leaves no realpossibility for consumers to choose between different architectural styles from the stockof new buildings. The purpose of this thesis is to examine whether architecture affects housing prices. The study is conducted on postal code areas 01510 and 01520 in Vantaa and the data used in the analysis comprises dwelling transactions based on data from the Central Federation of Finnish Real Estate Agencies. The final data set for old dwellings consists of 1411 individual dwelling transactions between 2010 and 2020 and 1341 individual dwelling transactions for new dwellings between 2000 and 2010. Method used in this study is hedonic regression analysis which is a commonly used method in analyzing housing prices in the field of economics. Regression analysis is run with two different data sets of which first consists of dwellings in the secondary market and the second consists of new dwellings. The results imply that architecture has an effect on housing prices as dwellings within buildings representing neo-traditional architecture are being associated with 5.5% higher prices when controlling for other observed dwelling characteristics. Additionally,the results indicate that the premium paid for dwellings in buildings representing neo-traditional architecture has been formed only after they are sold to consumers the first time as the dwellings in new neo-traditional buildings are being associated with a price discount of 5.6%. This implies, that the developers have not been able to correctly measure the price premium that consumers would be willing to pay for the neo-traditional architecture.

Description

Supervisor

Oikarinen, Elias

Thesis advisor

Tulokas, Pauliina

Keywords

housing prices, housing price determinants, architecture, hedonic regression analysis

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