|Tsur Somerville is an associate professor, Director of the UBC Centre for Urban Economics and Real Estate, and holder of the Real Estate Foundation Professorship in Real Estate Finance at the Sauder School of Business at UBC. His primary areas of research are housing markets, Canadian mortgage markets, and real estate development. He has published in all of the leading journals in urban economics and real estate and served on the boards of the top academic organizations and on multiple academic journal editorial boards in these fields. In addition to his academic research, Somerville is a frequent commentator in the local and national media on housing markets. Somerville received his Ph.D. in Economics from Harvard University and his BA from the Hebrew University (Israel) in Economics and East Asian Studies and has been at UBC since 1993.
|Economists typically present utility functions in terms of an individual’s own consumption for purposes of simplicity. Yet pursuit of status, as defined as one’s own standing relative to others in a chosen preference group, appears to be nearly as fundamental an aspect of human behavior. With conspicuous consumption it is not enough to not just own products, but others must know that you own them. In this paper we examine the premiums buyers pay for height in multi-storied condominium buildings in Vancouver, Canada to understand the importance of status in pricing. We define status as the height of one's apartment, relative to the heights of others, as opposed to absolute utility from its height independent of that of others. We find that independent of their actual height, buyers pay a premium to be higher up in any given building, those these premiums are small relative to the value placed on both height overall and on views. By measuring both a unit's floor, and the amount of airspace (view) uninterrupted by other structures, we are able to identify the relative importance buyers place on height, view, and status in residential condominiums. Our data from Vancouver, Canada's downtown core includes over 300 residential towers greater than four stories with large variance in views, allowing for considerable variation in the variables of interest.|
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