Property valuation using machine learning algorithms on statistical areas in Greater Sydney, Australia

Abstract

Property valuation plays a significant role in urban economics and is of great importance to various stakeholders who interact and shape the city, including property owners, buyers, banks, land developers, real estate agents, local councils and government planning authorities. In the literature, various predictive models have been proposed to automate the calculation of property value, most of which endeavour to factor in the combination of property characteristics, market factors and location-based attributes associated with individual properties use large citywide databases. At the same time, it has been widely acknowledged that regional sub-areas have impacts on property price prediction. Therefore, this paper aims to investigate the performance of various techniques on sub-areas using the Greater Sydney Region as the study area. The sub-area in this paper is defined as the statistical areas (SAs) as defined by the Australian Bureau of Statistics. In particular, two different SA geographies (SA4, SA3) along with the City Level are adopted to understand the spatial dependence which occurs at different levels. With real-world transaction records and data collected from a diverse range of sources, various methods including the traditional hedonic price model (HPM) and popular machine learning (ML) approaches are implemented and evaluated for property price prediction. Two different property markets for residential property are modelled, being for housing stock and apartment (unit) stock. Experimental results show that Random Forest and Gradient Boosting-based methods outperform other approaches in most scenarios and that the high spatial resolution property sub-area (SA3) improved the performance in terms of overall model accuracy. This research provides insights into how sub-area machine learning models can be employed in real estate to characterize property price, and helps understand the influential factors in different local geographical areas for policy-making.