DP11439 Distinctively Different: A New Approach to Valuing Architectural Amenities

Author(s): Gabriel Ahlfeldt, Nancy Holman
Publication Date: August 2016
Keyword(s): Architecture, boundary discontinuity, conservation areas, design, England, property prices
JEL(s): C7, D23, R52
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=11439

We propose a method to estimate the capitalised value of the architectural design quality of an area. Our economic design premium is identified by spatially differentiating property prices and design quality within neighbourhoods and comparing the differences across neighbourhoods. We apply our method to 48 conservation area neighbourhoods in England in which we analyse around 7900 property transactions and interview more than 500 residents. We find a capitalisation effect of about 6.6% (£16k) associated with a one standard deviation increase in our index of distinctive design. Our results suggest that this effect is at least partially driven by architectural externalities.