Floor-level premiums in high-rise and low-rise buildings

Abstract

This paper examines a unique feature of multi-storey buildings – floor-level premiums. Floor-level premiums refer to the price paid for the vertical location of a flat, measured by its floor level. Previous hedonic price studies unequivocally showed that floor-level premiums are positive. However, they were often based on the assumptions that floorlevel premiums are constant 1) across different floor levels within the same building and/or 2) across different buildings given the same floor level. This second assumption is particularly interesting because it begs the question of whether the same premium is paid for high-rise and low-rise buildings. For instance, do we pay the same for the 5th floor of a low-rise building and that of a high-rise building? Based on a sample of highly homogeneous buildings (except for their heights), we found that floor-level premiums were not constant but diminishing with respect to floor levels. Moreover, there was no significant difference in the pattern of floor-level premiums between high-rise and lowrise buildings. Finally, there was a positive and significant premium for shorter buildings over taller buildings.