The impact of residential development on nearby housing prices

Abstract

Purpose

Even as multi-story apartment building development proposals in existing neighbourhoods represent a substantial component of policy debate at local planning boards, there is limited evidence for the impact of such residential developments on surrounding apartment values. This paper aims to address the void in knowledge, and the impact of multi-story apartment building developments on apartment values in residential high-rise areas located outside city and district centres is investigated in Helsinki Metropolitan Area, Finland.

Design/methodology/approach

Whether a multi-story apartment building development is followed by an increase in housing values depends on both positive and negative externalities. To specify valuation effects of proximate development projects, advanced research design combining matched sample methodology and hedonic-based difference-in-difference approach is used.

Findings

It appears from the analysis that completion of a single multi-story apartment building has an immediate positive impact on apartment values within 300 metre radius, while there is no statistically significant impact on price trend.

Research limitations/implications

This paper studies apartment values only in Helsinki Metropolitan Area, Finland, and it is important to notice that local regulations and market conditions may have a notable impact on the outcomes.

Originality/value

This study is the first of its kind to provide with statistically significant evidence for positive impacts from multi-story apartment building development in Finnish residential high-rise areas and may have a crucial role in helping to dispel prejudices related to such developments.

Citation

Kurvinen, A.T. and Vihola, J. (2016), "The impact of residential development on nearby housing prices", International Journal of Housing Markets and Analysis, Vol. 9 No. 4, pp. 671-690. https://doi.org/10.1108/IJHMA-10-2015-0069