Abstract
This study estimates the effect of spatial heterogeneity and housing‐unit attributes on the value of apartment housing in a densely urban Chinese housing market. This paper contributes to the literature in two ways. First, high‐rise housing complexes present complications in that the vertical dimension is important in purchase decisions—yet the spatial econometric literature has focused exclusively on two dimensions. We introduce a three‐dimensional (3‐D) spatial weights matrix to capture the potential for “within project” correlation among housing units located on different floors within a project. Second, a significant proportion of the world's population lives in urban high‐rise buildings but the literature has, for the most part, completely ignored such markets. Test statistics support the use of a 3‐D weight matrix; our application of the hedonic methodology to a dense, vertical housing market shows that it can be used to value amenities located within or adjacent to housing complex amenities. In our empirical example, though, we observe little difference in marginal valuation of amenities under a 3‐D weight matrix relative to a standard 2‐D weight matrix.
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