An empirical study on synergistic value of penthouse units in Hong Kong

Abstract

This study contributes to the field of real estate economics by empirically examining the pricing dynamics of penthouse units, which comprise “TFUs” and “Fung Wong” units, in Hong Kong’s luxury residential market – a niche yet symbolically important segment. Given the existing research gaps, it aims to address the question: “Do these special units confer any ‘Synergistic Value’?”. In other words, the subject of investigation is whether penthouse units are traded at a price greater than the total respective value of these two different assets. The results indicate the prevalence of ‘Synergistic Value’ in penthouse units’ transactions. Such price premiums vary across different locations, with Hong Kong Island commanding the highest premiums. However, buyers’ preferences towards larger-sized penthouse units in prime locations are indiscernible. These findings suggest that private developers should leverage the supply of smaller-sized penthouse units to capitalise on this niche residential market.