housing-marketIn Copenhagen, Denmark, it is a general rule that the price per square meter for apartments is lower, the larger the apartment is. There are, of course, exceptions to this rule, especially in the luxury segment, where prices can be wild. I would like to know, whether this is a general rule that applies also internationally, or whether the reason for this rule are related to local conditions in Copenhagen.
In the case that it is a general rule that applies internationally, I would like to know the reason for this.
I guess it is a general rules (at least it is in all places I lived/visited).
The reason is probably that the utility value of additional square meters decreases when the total surface grows. Indeed, how much are you willing to pay for an additional 1 m^2 when you already have 10, 100 or 250 ? When you have 10 m^2, 1 more can make the difference, when you have 250 it is unlikely.
Also, the competitive pressure is lower for larger apartments since there are fewer customers, so the price is mechanically lower.
Rational economic agents think at the margins. And you story is consistent with diminishing marginal utility of floor space.
If ceteris paribus the marginal utility of floor space is always decreasing (i.e., agents always derive less utility from the $n^{th}+1$ sqft than from the $n^{th}$) and price is always proportional to marginal utility, then the cost per sqft will always be less for the larger apartment.
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