The Impact of Large-Scale Property Developments on Nearby Housing Prices

Abstract

The paper at hand estimates the impact of large-scale property developments on nearby housing prices. It aims to understand how property developments affect prices of existing neighboring dwellings. In addition to the event study, variations of distance, project size and neighborhood quality are to be compared in particular. Therefore, more than 400,000 residential transactions between 2008 and 2021 in London are analysed using a hedonic regression and Difference-in-Differences strategy. The distance to the nearest project defines treatment (0 to 700m) and control group (700 to 3000m). This paper finds that property developments significantly increase prices of existing properties in the surrounding area. Their positive influence builds up from permission until completion and remains at a positive level over subsequent years. While the effect fades out with distance, it may become larger as project size increases. The upgrading effect is clearly more pronounced in low-income areas. It is concluded that large-scale property developments upgrade nearby housing prices.

Keywords: Development, Externalities, Housing, Neighborhood