The Impact of Luxury Housing on Neighborhood Housing Prices in Taipei City

Abstract

This study investigated whether a decision to construct luxury housing can help increase neighborhood housing prices. The difference-in-difference method was used in the analysis. Housing transaction data from 2008 to 2011 were used in the analysis. According to the empirical results, after eliminating the common growth in prices (10.6%) between the neighborhood in which luxury housing was to be built and the other non-luxury neighborhood, the real gap in the housing prices caused by the luxury housing was 11.2%. This suggests that luxury housing has spillover effects on neighborhood housing prices and, specifically, can help to increase neighborhood housing prices. Furthermore, the results showed that housing prices in the neighborhood in which the luxury housing was to be built were inversely proportional to the distance from the luxury housing.