The study investigates the formation of transaction price premiums for detached houses in rapidly commercializing inner-city residential areas. focusing on land rent theory and the concept of highest and best use. Using Seoul’s Mapo-gu, which includ...
The study investigates the formation of transaction price premiums for detached houses in rapidly commercializing inner-city residential areas. focusing on land rent theory and the concept of highest and best use. Using Seoul’s Mapo-gu, which includes Yeonnam, Mangwon, and Hapjeong, as a case study, we empirically analyzed the impact of commercial land-use conversion on transaction prices through a hedonic pricing model. In addition to variables identified in previous studies, this research incorporates the status and type of land-use changes, buyer characteristics (corporate versus individual), and urban planning factors such as zoning and district-unit plans.<BR/>The analysis reveals that the commercial conversion of detached houses can result in price premiums of up to 51.6%, with remodeling preferred over new construction at a rate of 94.8%. Additionally, corporate buyers tend to pay 9.9% to 19.4% more than individual buyers, underscoring the importance of buyer type in price formation. While zoning was not statistically significant, district-unit plans that fail to reflect local demand and commercial context were linked to price increases due to supply constraints. These findings indicate that aligning urban planning with market demand is essential for effective policy. The study offers empirical insights for land-use policy, urban planning, and strategies to address gentrification in evolving urban neighborhoods.