Appropriate Housing Valuation Using Hedonic Price Function and Promoting Information Disclosure

Abstract

AbstractThis chapter proposes a housing valuation method using a hedonic price function obtained from a sample of Tokyo-based condominiums listed for sale in a housing magazine. The chapter calculates the real theoretical prices of houses by regressing the hedonic price function and by substituting the attributes and quality-adjusted price index in the function’s estimated equation, and removing the analyst error in the process. The results show that this valuation method leads to pareto optimal allocation in the housing market. To realize this appropriate housing valuation, information to be disclosed is the estimated equation, parameters used for calculating the real theoretical prices of houses, and the attributes and offer prices of houses. The disclosed information allows for an objective valuation of houses outside a dataset as well as houses inside a dataset. This method can also accelerate the circulation and promotion of used houses and the newly built house market, respectively.KeywordsHedonic price functionHousing valuationInformation disclosure