Does Controlling for Neighbourhood Quality Matter More for Different Types of House Buyer?

The inclusion of neighbourhood quality variables has been recognised as reducing the bias in house price indices and increasing the explanatory power of regression-based hedonic indices. The ability to identify the type of purchaser is used in this paper to test the importance of neighbourhood quality variables for a first-time or second-time buyer. This paper includes the physical location of the house and neighbourhood characteristics using small area population statistics from the 1996 Census of Population in Ireland. The results confirm for the Dublin market the experience of the US and UK literature that physical and neighbourhood location influence price. The paper also shows that neighbourhood quality is more important for the first-time buyer. While some tentative explanations are offered as to why this is the case, this finding is worthy of further investigation.