Does size matter? The dynamics of housing sizes and prices in Hong Kong

Abstract

Conventional analyses on real estate pricing strategy concentrate on the impact brought about by the existence of various physical and environmental attributes such as location, view and amenity effects. For each of these variables, the extent of impact across different property types seems to be rather constant. This, however, may not hold when it comes to a specific variable—size, especially in terms of per-square-foot price of the subject property. While it is a general perception that larger real estate should command a higher total price because of the simple logic of aggregating the unit price from a larger floor area, in some sub-sectors of the property market such as the retail property sector, it is not uncommon to find that larger shops tend to have relatively smaller unit price/rent compared to smaller shops, other things being equal. In this paper, the authors would like to show that in the residential sector in Hong Kong, this common market practice is being reverted when we find that larger residential flats command relatively higher per-unit price (and hence also the overall price of the subject property), making larger residential flat proportionately more expensive.