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The price premium of heritage in the housing market: evidence from Auckland, New Zealand

Abstract:

Heritage places are one of many urban features that shape the form and identity of a city. Local government regulations protect and conserve heritage but in so doing also generate restrictions or opportunity costs for homebuyers and developers. In this paper, we take Auckland, New Zealand, as case study and estimate price effects of two different forms of local government heritage protection: scheduled heritage places and Special Character Areas. We find a statistically significant price penalty of around -9.6% for houses protected for heritage values, between years 2006-2016. Yet, we also identify an external and local price premium, related to the number of heritage places around a house. This local density effect is approximately 1.7% for an additional heritage place in a radius of 50 meters around the house, and decreases as the radius under analysis expands. We also find a price premium for a house located in Special Character Areas, for which the effect is positive and reaches 4.3%. Reported effects are robust to several specifications but are highly dependent on time dynamics.