Spatio-Temporal Effects of an Urban Development Announcement and Its Cancellation on House Prices – A Quasi-Natural Experiment

34 Pages Posted: 11 Sep 2017

See all articles by Dongwoo Hyun

Dongwoo Hyun

University of Reading - Henley Business School

Stanimira Milcheva

University College London

Date Written: June 12, 2017

Abstract

We use a spatio-temporal autoregressive difference-in-differences (SDID) framework to assess the strength of the effect, distributed across space and time, of announcements associated with urban development on house prices. We use a quasi-natural experiment of a large-scale urban redevelopment project in Seoul, South Korea, first announced in 2007 and cancelled six years later without any construction having taken place. Using a rich dataset comprising of 21,200 apartment transactions between 2006 and 2015, we find that the development announcement effect accounts for an increase in apartment transaction prices by up to 7.3% depending on the location of the property from the project site. Prices decrease by up to 5.2% following the cancellation of the project. The SDID captures significant spatial autoregressive effects accounting for up to 15% of the changes in transaction prices, reducing the announcement effects from a standard DID model.

Keywords: Announcement effect, spatial spillover, spatio-temporal autoregressive model, difference-in-differences, apartment transaction prices.

JEL Classification: C21, R15, R31, R53

Suggested Citation

Hyun, Dongwoo and Milcheva, Stanimira, Spatio-Temporal Effects of an Urban Development Announcement and Its Cancellation on House Prices – A Quasi-Natural Experiment (June 12, 2017). Available at SSRN: https://ssrn.com/abstract=3033905 or http://dx.doi.org/10.2139/ssrn.3033905

Dongwoo Hyun (Contact Author)

University of Reading - Henley Business School ( email )

Whiteknights Campus
Reading, RG6 6UD
United Kingdom

Stanimira Milcheva

University College London ( email )

1-19 Torrington Place
Department of Construction and Project Management
London, London WC1E 7HB
United Kingdom

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