Abstract
This study investigated the spatial spillover effects of luxury housing during and after construction, in regards to increases in housing prices in neighboring areas as well as the spatial dependence of neighboring housing. This study focused on already completed luxury housing in Taipei, Taiwan. First, the nearest-neighbor matching approach of propensity score matching was used to overcome the problem of data heterogeneity. The difference-in-differences (DD) method and spatial econometrics were used for analysis. The empirical results indicated that the spatial error model had the best goodness of fit. This indicated that housing prices increased by 13.0% during construction of luxury housing nearby. This indicated that housing prices increased by 5.8% after the construction of luxury housing nearby. The empirical results showed that the ongoing and completed construction of luxury housing had spillover effects on housing prices. The effect of ongoing construction of luxury housing was particularly large in scope, indicating its role as a predictor of psychological reaction in the market.
Highlights
With the improvement of living standards in Taiwan, housing constitutes the highest expenditure with respect to the basic necessities of life
This study investigated the effect of luxury housing on housing prices in neighboring areas during and after its construction
Can (1990) used the Moran test and the Lagrange multiplier (LM) to test spatial autocorrelation of housing prices; the results indicated a clear presence of spatial dependence in the error terms of housing price and better explanatory power of the spatial autoregression model with regard to housing prices as compared with the ordinary least squares (OLS) regression model
Summary
With the improvement of living standards in Taiwan, housing constitutes the highest expenditure with respect to the basic necessities of life. Citizens of Taiwan have paid more attention to quality of life. This has led to the development of a new type of housing, referred to in the market as luxury housing, derived from existing types of housing such as condominiums, studios, multi-story houses, and high-rise suites. Lin and Jou (2005) described typical luxury housing as housing with rare spatial resources such as beautiful landscapes and good locations, and characterized by a high total price, a large living space, good facilities, and high prestige. According to Wang (2008), luxury housing is a small market segment targeting upper class consumers; Wang suggested that such housing is showy by nature, and its target consumers are relatively homogeneous, which provides a cluster effect. According to Wang (2008), luxury housing is a small market segment targeting upper class consumers; Wang suggested that such housing is showy by nature, and its target consumers are relatively homogeneous, which provides a cluster effect. Lin (2004) maintained that luxury housing has shaped a particular lifestyle for upper class society, and that it is local landmark, and an indicator of wealth and ostentation
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