Top‐floor discounts in residential buildings: Evidence from South Korea

Sam Il Myoung Hwang and Leo Ma

Real Estate Economics, 2023, vol. 51, issue 2, 441-469

Abstract: This study assesses the phenomenon of resale price discounts for top‐floor units of residential buildings, or “top‐floor discounts.” Using 1.9 million resale transactions of apartment units from South Korea, we find that top‐floor discounts range from 1.3% to 8.3% of resale prices. We hypothesize that top‐floor discounts exist because of larger heating/cooling costs for these units relative to those on lower levels, resulting from relatively more extreme variation in indoor temperatures unique to top‐floor apartment units. Using a household‐level survey data on energy consumption and exploiting variations in weather conditions and roof material across time and regions throughout South Korea, we provide evidence in support of our hypothesis.

Date: 2023
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https://doi.org/10.1111/1540-6229.12409

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