Neighborhood preferences of house buyers: the case of Klang Valley, Malaysia

Purpose - The paper attempts to examine the impacts of neighborhood types, as defined by a gated‐guarded neighborhood with landscape compound and a freehold tenure neighborhood on residential property values in Klang Valley, Malaysia. Design/methodology/approach - A weighted least squares method together with a heteroscedasticity consistent covariance matrix estimator is used to estimate the coefficients of structural, locational and neighborhood attributes of dwellings on house prices. Findings - Results show that the gated‐guarded neighborhood with landscape compound could increase residential property values by 18.1 per cent. Additionally, the positive perception of a freehold property in the neighborhood could induce a price premium of 23.7 per cent. Research limitations/implications - It is reasonable to believe that neighborhood types play a role in determining residential property values. Practical implications - In order to meet the increasingly affluent and discerning house buyers, developers, instead of just offering dream homes in prime locations, should provide intangible benefits in the neighborhood that are just as sought after by today's house buyers – such as a sense of security in the landscape compound, a feeling of harmony with one's surroundings and an infrastructure which supports the lifestyle of house buyers. Originality/value - House buyers in Malaysia are increasingly aware of the value of gated‐guarded and freehold neighborhoods. However, there is little evidence to assess the value provided by such neighborhoods in Klang Valley, Malaysia. The paper aims to determine the responsiveness of the willingness to pay to changes in neighborhood types.