The Impacts of Open Data and eXplainable AI on Real Estate Price Predictions in Smart Cities

Abstract

In the rapidly evolving landscape of urban development, where smart cities increasingly rely on artificial intelligence (AI) solutions to address complex challenges, using AI to accurately predict real estate prices becomes a multifaceted and crucial task integral to urban planning and economic development. This paper delves into this endeavor, highlighting the transformative impact of specifically chosen contextual open data and recent advances in eXplainable AI (XAI) to improve the accuracy and transparency of real estate price predictions within smart cities. Focusing on Lisbon’s dynamic housing market from 2018 to 2021, we integrate diverse open data sources into an eXtreme Gradient Boosting (XGBoost) machine learning model optimized with the Optuna hyperparameter framework to enhance its predictive precision. Our initial model achieved a Mean Absolute Error (MAE) of EUR 51,733.88, which was significantly reduced by 8.24% upon incorporating open data features. This substantial improvement underscores open data’s potential to boost real estate price predictions. Additionally, we employed SHapley Additive exPlanations (SHAP) to address the transparency of our model. This approach clarifies the influence of each predictor on price estimates and fosters enhanced accountability and trust in AI-driven real estate analytics. The findings of this study emphasize the role of XAI and the value of open data in enhancing the transparency and efficacy of AI-driven urban development, explicitly demonstrating how they contribute to more accurate and insightful real estate analytics, thereby informing and improving policy decisions for the sustainable development of smart cities.