Changing economies of scale in housing production as related to supply and demand factors

Nurel, Semin
Studies investigating housing production tendencies in cities report that, due to the increase in car ownership and growing concern for healthy living environment, conventional apartment building, built on single parcels has become inadequate to meet households' housing preferences. As a result, demand for living in housing estates, which provide preferred amenities has increased. There are indications that income elasticity of housing demand has increased, implying that such housing is considered as luxury goods at which willingness to pay is expected to rise with the changing demand. This dissertation is based on the observation that there is an increasing trend in the production of large scale housing estates endowed with prestigious attributes at the outskirts of the cities where land prices are low in Turkey. Thus, the hypotheses of the thesis were defined as house builders can be expected exploiting cost advantages by expanding their scale of housing production; households' increasing willingness to pay for such housing estates is triggered by Veblen and Bandwagon effects and the housing developments endowed with prestigious attributes that require land at the outer regions of the city would have lower floor area ratios. The methods that are used in the empirical analysis of this thesis are hedonic and logistic regression analyses. The results of the empirical studies point out that, households are searching for distinctive living areas endowed with prestigious attributes that are no longer provided in inner cities. Increasing demand for such housing estates results in increase in prices which lead house builders to produce more. Thus, house builders are producing more dwelling units, by managing to raise floor area ratios for their plots, in order to increase their revenue and profit rather than to achieve scale economies.


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Citation Formats
S. Nurel, “Changing economies of scale in housing production as related to supply and demand factors,” Ph.D. - Doctoral Program, Middle East Technical University, 2015.