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Inside a Bubble and Crash: Evidence from the Valuation of Amenities

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Inside a Bubble and Crash: Evidence from the Valuation of Amenities, Ronan C. Lyons, February 18, 2012

  • “Using a rich dataset of one million property listings in Ireland, 2006-2011, this paper examines four issues related to understanding housing markets and their cycles. Firstly, it finds that five broad categories of location-specific amenities are reflected in costs of accommodation. Secondly, it finds that the price of amenities is amplified in urban markets, most likely reflecting income elasticities and Tiebout-style sorting. Thirdly, there is typically a greater valuation of amenities in the sales segment than in lettings, indicative of either tenant search costs or buyer lock-in concerns. Lastly, amenity valuations vary with the market cycle. There is more evidence in favour of countercyclical amenity prices, a “property ladder” effect, than procyclical prices and the desire to lock in access to amenities.”
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