How cultural values are reflected on the housing market – direct effects and the cultural spillover

Abstract

Purpose The purpose of this paper is to analyse two questions. First, is there, and if so, how large is the price premium paid for a building exhibiting a cultural value? Second, are there any spillover effects of buildings with cultural values on sales prices of neighbouring houses? Design/methodology/approach Using a unique database of all buildings in the region of Halland, Sweden, combined with transaction data, hedonic models can be estimated, with spatially lagged variables describing proximity to three classes of culturally classified building – A, B and C – corresponding to building of national interest, building of regional interest and building of local interest. In addition, the authors also estimate models with a spatial specification on the error term, in an attempt to control for omitted variables. Findings The results indicate that cultural classification plays a role in determining the price of a property, with large effects (ranging between 36 and 60% price premiums) for the highest classification. In addition, the authors find evidence of a cultural externality, houses in the vicinity of building with high cultural value sell at a small, but statistically significant premium of 1%. Originality/value The cultural externality may be overlooked when it comes to valuation of cultural values in society, and therefore, it is likely that warranted protection acts to preserve cultural values in buildings become less than the social optimum. This paper suggests a new measure to cultural values contrasting previous research that rely on cultural preservation. This approach should limit problems with measurement errors that may lead to biased results.

What’s so special about character?

“…Our results are consistent with Andersson et al (2019), who indicate that across time, land is directed towards its most valuable state. Changes in price premiums have relied on expectations, as it became clear that upzoning was about to occur in many areas.…”

“…In practice, the benefits of conserving SCAs in Auckland do not appear to be substantial enough to justify not relaxing regulatory constraints or heritage protection measures (Andersson et al, 2019; Koster et al, 2012). This may imply that despite the significant and positive heritage and SCA externalities, these do not amount equally to the option value of development introduced by the AUP.…”

“…The direction of the effect is context-dependent and could take the form of a price premium reflecting the positive externalities of heritage quality, or of a price penalty reflecting, say, the restrictiveness of the preservation rules (Ahlfeldt and Maennig, 2010; Benhamou, 2003; Holman and Ahlfeldt, 2015). Andersson et al (2019) find for the region of Halland, Sweden, that heritage buildings have price premiums ranging between 36% and 60%. For neighbouring non-listed houses in turn the premium is only about 1%.…”

“…For example, the decision to terminate preservation rules may be taken with the intention to increase housing density, boost the delivery of housing, relax land use regulations and improve affordability conditions for homebuyers (Fernandez, 2019b). Arguably, market forces will then direct land to its most profitable use (Andersson et al, 2019). Hence, increased housing density or ‘upzoning’ creates an option value of (re)development in land parcels or dwellings where preservation rules are terminated.…”

Linking the Creative Economy with Universities’ Entrepreneurship: A Spillover Approach

“…For instance, Sánchez [49] referred to and measured "specific creative externalities"-such as heritage, related variety, and Florida's 3Ts (technology, talent, and tolerance)-next to more traditional spillovers (urbanisation, localisation, and social and relational capital) to explain the location of creative industries in Spain. Andersson et al [50] employed a cultural-heritage externality to estimate the impact of culturally classified property on the sale price of neighbouring buildings. Bisin and Zanella [51] adopted a concept of cultural spillovers to explain immigration deterrents of individuals belonging to different ethnic groups.…”