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Distinctively Different: A New Approach to Valuing Architectural Amenities

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  • Gabriel M. Ahlfeldt
  • Nancy Holman

Abstract

We propose a method to estimate the capitalized value of the architectural design quality of a neighbourhood. 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 47 conservation area neighbourhoods in England in which we analyse around 7900 property transactions and interview more than 500 residents. We find a capitalization effect of about 25.4% (£38.7k) associated with a one-step increase on a five-step scale ranging from not at all-distinctive to very distinctive. Our results suggest that this effect is at least partially driven by an architectural externality.

Suggested Citation

  • Gabriel M. Ahlfeldt & Nancy Holman, 2015. "Distinctively Different: A New Approach to Valuing Architectural Amenities," SERC Discussion Papers 0171, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:sercdp:0171
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    More about this item

    Keywords

    Architecture; beauty; boundary discontinuity; conservation areas; design; England; property prices;
    All these keywords.

    JEL classification:

    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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