Co-Living at Its Best—An Empirical Study of Economies of Scale, Building Age, and Amenities of Housing Estates in Hong Kong

Abstract

Co-living is commonly considered as an arrangement for rental housing. However, co-living in housing estates by sharing common amenities among co-owners has been practiced for many years in high-density cities. Yet, there have been very few empirical studies on the estate premium and the economies/diseconomies of scale effect on house prices, probably due to the lack of data. This study is a novel attempt to examine the economies/diseconomies of scale effect using the hedonic price model to estimate the impact of the number of housing units in a housing estate on house prices, ceteris paribus, using Hong Kong housing transaction data. The results confirm the hypothesis of estate premium and the economies of scale effect of co-living in housing estates. Economies of scale are observed, with larger estates commanding a premium of up to 5031 units, beyond which the effect declines, hinting at potential diseconomies. Building age moderates this effect, as we observe a larger scale effect in especially younger estates with lower maintenance costs. Additional tests confirm the positive correlation between amenities and prices, with an optimal amenity number enhancing prices, while excess amenities lead to diminishing returns. A case study reinforces these findings, demonstrating a general trend of decreasing management fees with increasing estate size, supporting the notion of economies of scale. Overall, this study contributes valuable insights for developers and homebuyers, emphasizing the importance of balancing estate size and amenities for cost-sharing advantages and effective management in co-living housing estates.