The Market Valuation of Interior Design and Developers Strategies: A Simple Theory and Some Evidence

45 Pages Posted: 22 Jan 2013

See all articles by Charles K. Leung

Charles K. Leung

City University of Hong Kong

Jun Zhang

City University of Hong Kong

Wai Ma

The Chinese University of Hong Kong (CUHK)

Date Written: January 20, 2013

Abstract

How much do the market values of housing reflect its interior design? Does the interior design interact with other housing attributes? Following the recent research based on “graph theory,” this paper confirms the importance of internal design variables in a hedonic pricing model, which is applied to a large dataset of high-rise apartment buildings in Asia. The evidence is consistent with a simple theory that developers strategically use interior design to “dilute” the effect of location, which leads to a form of endogenous multi-collinearity. Directions for future research are also discussed.

Keywords: endogenous multi-collinearity, interior design, market valuation, dummy variables, interaction terms

JEL Classification: R10, R20, R21

Suggested Citation

Leung, Charles Ka Yui and Zhang, Jun and Ma, Wai, The Market Valuation of Interior Design and Developers Strategies: A Simple Theory and Some Evidence (January 20, 2013). Available at SSRN: https://ssrn.com/abstract=2203647 or http://dx.doi.org/10.2139/ssrn.2203647

Charles Ka Yui Leung (Contact Author)

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Jun Zhang

City University of Hong Kong

Kowloon Tong
Hong Kong

Wai Ma

The Chinese University of Hong Kong (CUHK)

Shatin, N.T.
Hong Kong
Hong Kong

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