Abstract
This paper introduces the application of real estate pricing DP DEA - Double Perspective Data - Envelopment Analysis to solve the LOOP (Law of One Price) arbitrage. A general equilibrium model of real estate values was developed to analyze price variation over digital map, and applied to the urban area of the city of Joinville. The power of real estate locational value assessment using DP-DEA is then compared with the usual MRA - Multiple Regression Analysis using a real case of land data. All computational generated results and data were subsequently geocoded on a GIS - Geographic Information System. The computational generated Price line Map is easily visualized in a real estate value chart that can enhance accuracy when compared to a conventional methodology, also a tool for immediate updates and testing the effects of new developments over urban areas.
Highlights
In this paper, the DP-DEA (Double Perspective – Data Envelopment Analysis) [1] is applied in order to establish the LOOP (Law of One Price) [2] arbitrage for estimating property taxes value.Kuosmanen et al [3] approached an application with LOOP-based weight restrictions incorporated in Data Envelopment Analysis, utilizing the relation between the industry level and the firm level cost efficiency measures, they propose to apply a set of input prices that is common for all firms and that maximizes cost efficiency of the industry
This paper introduces the application of real estate pricing DP DEA - Double Perspective Data - Envelopment Analysis to solve the LOOP (Law of One Price) arbitrage
This methodology intends to make a contribution to the real estate community in three different ways: firstly, by introducing the concept of the LOOP/DP-DEA used to estimate the fundamental value; secondly, by showing how this concept can be applied in real terms, namely the real estate value assessment problem; and thirdly by suggesting that the idea of the two enveloping surfaces can be brought to the more general context of economic/ financial transactions, taxation, urban planning or even auctions
Summary
The DP-DEA (Double Perspective – Data Envelopment Analysis) [1] is applied in order to establish the LOOP (Law of One Price) [2] arbitrage for estimating property taxes value. Empirical studies spanning more than four decades reveal that price dispersion is the rule rather than the exception in many homogeneous product markets This occurs to the heterogeneous real estate market. Suppose that the tax assessor in your town has assessed your house at $490,000 for property tax purposes Is this value too high or too low?. Find assets comparable to the one whose value we want to estimate, and make judgments about which differences are important on their value to investors. This specific market equilibrium point is achievable when buyer and seller engaged in a dispute have attended their own interests of all kinds on the value of a specific real estate. Our goal in real estate assessment is to estimate a value of a spread range between the maximum value and the minimum value offered or bided in an efficient property market
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