The pattern of floor level premium in apartment buildings

This study examines the pattern of floor premium in apartment buildings. Floor-level premium refers to the price paid for the vertical location (floor level) of a housing unit in a multi-storey residential building. Previous hedonic price studies unequivocally showed that floor-level premiums are positive. However, they are often based on the hypotheses that: 1) floor-level premiums are constant across different floor levels within the same building; 2) floor-level premiums are constant across different buildings given the same floor level; and 3) building height or density does not matter. This second hypothesis 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 housing units in high buildings of varying height, we found that floor-level premiums were not constant, but diminished with respect to floor levels. Moreover, there was no significant difference in the pattern of floor-level premiums between high-rise and low-rise buildings. Finally, there was a positive and significant premium for units in low rise buildings over high rise buildings.