The Market Valuation of Interior Design and Developer Strategies: A Simple Theory and Some Evidence
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Charles Ka Yui LEUNG, Wai Yip MA, Jun ZHANG
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International Real Estate Review
How much do the market values of housing reflect its interior design? Does the interior design interact with other housing attributes? By following recent research based on the “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 in that developers strategically use interior design to “dilute” the effect of location, which leads to a form of endogenous multicollinearity. Directions for future research are also discussed.
Endogenous Multicollinearity; Interior Design; Market Valuation; Dummy Variables; Interaction Terms