Do Suburban Areas Impact House Prices?

Abstract

Urban fringes are frequently occupied by a particular socioeconomic group of households, who have a certain demand on real-estate markets. Consequently, it is advisable to model the suburban housing market in hedonic studies. The operationalization of suburbia is challenged by its inherent vagueness, specifically, its continuous merging with rural areas and its potentially fragmented spatial pattern. Investigating the urban fringe of Vienna, Austria, this research proposes a suburban taxonomy based on fuzzy clustering and a spatially explicit, nonlinear hedonic pricing model to determine the marginal price of suburbia on single-family homes. The clustering result suggests that suburban municipalities are increasingly located next to the main traffic arterials in the immediate proximity of the core city. The hedonic regression confirms a stratification of the housing market. Furthermore, a local intra-submarket in the south of the core city is evident, referring to an additional locational asset. Suburbia has a significant effect on housing prices and reflects a self-contained housing market, albeit one which is economically interrelated with other submarkets. It is concluded that suburbanites implicitly value such neighborhoods and are willing to pay a premium to live in like-minded communities.