This article presents a quantitative analysis of the spatial clustering of the luxury housing market in Paris. It bridges the gap between the marketing and socio-geographical literature, two bodies of literature that cover the topic of luxury without really referring to each other.
Our empirical strategy employs an instrumental variable (IV) approach combined with geographically weighted regressions (GWR) to address endogeneity concerns and spatial heterogeneity.
Our research shows that (1) Luxury housing is not always a safe investment. (2) The Parisian luxury housing market has not experienced significant global growth over the last decade, although there have been slight increases in some niche markets. (3) Spatial clustering of luxury housing has a positive effect on prices, suggesting the existence of a “luxury premium,” but this effect is weaker in the upscale neighborhoods.
This clustering may appear as a financial measure for gentrification dynamics.
