Exploring the “relocation premium”
Unlocking land for densification will, in some cases, require developers to purchase existing properties. To assess how feasible this is, we explored what level of “relocation premium” homeowners would be willing to accept to sell their home to a developer.
We adapted a price sensitivity technique typically used to assess optimum pricing for consumer goods, known as the Gabor-Granger technique, to test what kind of premium people would find acceptable.
First, we asked respondents to value their own homes, then we presented a series of offers ranging from -20% to +50% of that value. Offers were adjusted up or down based on their responses, allowing us to zero in on their “true minimum” acceptable price, as shown in these “offer paths”:
Offer paths in our Gabor-Granger experiment to establish a “relocation premium” per homeowner.
We found that, on average, homeowners expect a 16% premium in order to sell to a developer and relocate:
Distribution of “relocation premiums”
There are some interesting differences as we delve deeper into the data, though: people with a stronger attachment to their area, who’ve often lived there longer or feel a deep sense of place, tend to demand higher premiums to even consider moving:
“Relocation premium” by characteristics of the homeowner
An interesting extension of this analysis would be to model the results down to LPA level to provide developers with a more granular, local sense of what a relocation premium looks like in a specific place. Get in touch if that would be of interest to you.
All of Stack’s data relating to development, planning and the built environment is now accessible via strata: check it out for free!
Explore the series: