The negative effects of incomplete and abandoned buildings on nearby home prices

This study empirically analyzes the negative impact of incomplete and abandoned buildings on nearby home prices in Cheonan, South Korea. The difference-in-differences estimation method is applied leveraging unique geographic characteristics as an identification strategy. Houses near abandoned buildings are categorized into two groups separated by a railroad 128m wide, a distance sufficient to prevent movement between the two areas. Despite their physical proximity, the real estate markets in these areas likely experience similar economic trends, particularly in housing prices. However, the railroad acts as a barrier, preventing the negative effects of abandoned buildings from spilling over into the adjacent area. Empirical analysis indicates that a building abandoned due to internal issues with the construction firm decreases the prices of neighboring houses by KRW432,000 per m2. Additional analyses across different periods and geographic areas confirm the robustness of these results. This finding underscores the need for public intervention, including financial investments, to manage abandoned buildings effectively.