Does it matter how far you live from the city centre? A study of apartment values in Vienna

Abstract

The explanations provided in the literature for community-level variations in constant-quality house prices vary from urban economics (e.g., distance from the Central Business District) to local public economics (e.g., property tax rate) to urban-amenities theory (e.g., crime rate). This paper examines the impact of distance from the city centre on values of residential apartment units in Vienna. Data on individual owner assessments of apartment value along with other hedonic determinants of housing value is obtained from a popular online database of apartment units available for sale. The three candidates for the location variable include the district in which the apartment units are located, a categorical variable classifying location into three groups -the centre, neighbouring districts and outskirtsin addition to estimates of distance from a predefined point in the city centre to the apartment units. The control variables of the analysis include number of rooms, living area, number of the floor, number of bathrooms and toilets, availability of balcony / terrace / elevator / basement and type of flooring in addition to the information if the unit is furnished. The first part of the article examines the possible influence of distance and other location variables on the price of a constant-quality apartment. The results demonstrate a negative relation between distance from the city centre and apartment price. The tests employed to empirically explore if there is spatial autocorrelation in the residual series suggest use of the spatial autoregressive error model (SEM) as appropriate. The estimation results of the spatial model are very similar to those of the base model, suggesting that the results produced by the base model are not an outcome of any misspecification of the model.