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Volume 35, Number 3, 2013

The Effect of Elevation and Corner Location on Oceanfront Condominium Value
 

Bruce L. Gordon
Professor of Finance and Real Estate
University of North Alabama
Box 5131
Florence, AL 35632
Email: blgordon@una.edu

Daniel Winkler
Professor of Finance
Joseph M. Bryan School of Business and Economics
University of North Carolina at Greensboro
Greensboro, NC 27412-5001
Email: dt_winkler@uncg.edu

J. Doug Barrett
Professor of Quantitative Methods
University of North Alabama
Email: jdbarrett@una.edu

Leonard Zumpano
Professor of Finance
Alabama Association of Realtors Chair of Real Estate
University of Alabama
Email: lzumpano@cba.ua.ed

 

Abstract:

Although previous research indicates that condominium unit location within a development has an effect on its value, no research has been conducted specifically on oceanfront condominium units and the unique influences to which they are exposed. This study analyzes data from condominium sales along the Gulf Coast of Alabama using hedonic pricing models that explicitly account for the externalities associated with their structural location. The findings indicate that the positive externalities associated with upper-floor and corner units have a positive and substantial effect on value. Corner units offer even greater positive externalities and are shown to sell at a premium to interior units, due primarily to their more panoramic view. Failure to account for both the positive and negative externalities specific to resort type properties could result in serious misspecification when applying hedonic modeling to these property types.

 
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