Impact of Neighborhood Characteristics on Residential Property Values: A Critical Review of Literature

Neighborhood is a geographical unit within which given social affinities exist, even though the degree of their association and its significant to the lives of inhabitants differ greatly. The attributes of neighborhood which comprises both amenities and disamenities is a significant factor in house price determination due to its spatial linkage to the housing market. The aim of this paper is to critically review empirical literature on the impact of neighborhood characteristics on residential property values. Documentary data collected from various secondary sources were studied and carefully reviewed. Results obtained from the literature suggested that both neighborhood amenities and disamenities play very significant roles in the built up to the formation of residential housing prices. The uses of few explanatory variables were found to be dominant in the discussion of neighborhood characteristics that affect property prices/values. The study therefore suggest the use of many explanatory neighborhood variables to justifiably estimate the impact of neighborhood characteristics on residential property prices/values as this could also avoid omitted variable bias.