Does urbanization drive up housing prices? Novel evidence from remote sensing and dynamic panel quantile regression

Abstract

Purpose This study aims to quantify the influence of urbanization on housing prices at the district-based level, while also investigating the heterogeneous impacts across different quantiles of housing prices. Design/methodology/approach The study uses remote-sensed spectral images from the Landsat 7 ETM+ satellite to measure urbanization, replacing prior reliance solely on urban population metrics. Subsequently, the two-step system generalized method of moments is used to evaluate how urbanization influences district-based housing prices through three spectrometries: Urban Index (UI), Normalized Difference Built-up Index (NDBI) and Built-Up Index (BUI). Finally, this study examines the heterogeneous impacts across various housing price quantiles through Dynamic Panel Quantile Regression with non-additive fixed effects under Markov Chain Monte Carlo simulation. Findings The study demonstrates that urbanization leads to an increase in regional housing prices. However, these impact magnitudes vary across housing price quantiles. Specifically, the impact exhibits an inverse V-shaped curve, with urbanization exerting a more pronounced influence on the 60th percentile of housing prices, while its effect on the 10th and 90th percentiles is comparatively weaker. Originality/value This study uses a novel method of remote sensing to measure urbanization and investigates its effects on housing prices. Furthermore, it provides an empirical application of non-additive fixed effect quantile regression for analyzing heterogeneity.