Hedonic House Price Research Articles

Hedonic housing prices and environmental quality in Lebanon

Purpose This study aims to examine the impact of local air pollution on housing prices in Lebanon. Design/methodology/approach The authors apply a hedonic pricing approach using a unique data set from Lebanon. To account for non-linearities in pricing, the authors use three different functional regression forms for the hedonic model approach. The authors also deal with potential omitted variable bias by estimating a hedonic frontier specification. Findings The authors find that, in all specifications, air pollution negatively and significantly affects housing prices. The estimated marginal willingness to pay for a one microgram per cubic meter change in particulate matter (PM10) concentration ranges between 2.88% and 3.18% of mean housing prices. The authors also provide evidence of a negative pricing gradient away from the city center, landing support for the monocentric urban development hypothesis. Research limitations/implications Given the lack of a data set linking household socioeconomic characteristics with housing data, the authors only consider the first-stage hedonic model. Practical implications The proposed hedonic pricing regression approximates a housing pricing equation that can be used by policymakers. Social implications The findings suggest that pollution is a significant factor in household behavior in Lebanon. Originality/value This paper adds to the scant literature studying the effects of air pollution on housing prices in developing countries. To the best of the authors’ knowledge, this is the first paper to study the impact of pollution on housing prices in a country in the Middle East and North Africa Region.

Real Estate Transaction Taxes and Credit Supply

We exploit staggered real estate transaction tax (RETT) hikes across German states to identify the effect of house price changes on mortgage credit supply. Based on approximately 33 million real estate online listings, we construct a quarterly hedonic house price index (HPI) between 2008:q1 and 2017:q4, which we instrument with state-specific RETT changes to isolate the effect on mortgage credit supply by all local German banks. First, a RETT hike by one percentage point reduces HPI by 1.2%. This effect is driven by listings in rural regions. Second, a 1% contraction of HPI induced by an increase in the RETT leads to a 1.4% decline in mortgage lending. This transmission of fiscal policy to mortgage credit supply is effective across almost the entire bank capitalization distribution.

The quality-adjusted price evolution of houses and apartments in Flanders from 2005q1 until 2021q2

I construct a quality-adjusted hedonic house price index for Flanders from 2005q1 until 2021q2. I use data from a large franchise network of real estate brokers with transactions from 37,850 houses and 12,200 apartments. The results indicate that the average yearly nominal house price growth was equal to 4.6% (2.1% after inflation). However, the yearly growth rate differs substantially in different sub periods with above average growth rates in 2005-2008 and 2017-2021 while nominal price growth was in line with inflation from 2009 until 2016. The price evolution of apartments is very similar to houses. In addition to a hedonic price index, I also calculate the evolution of the time-on-market and sale-to-list ratio as new indicators to assess the housing market. Looking at the impact of the COVID-19 crisis on the housing market, we see that house prices increased faster outside central cities since the second half of 2020. For apartments, there is a strong increase in the price of apartments at the coast and a strong decrease in the time-on-market of apartments with a terrace in comparison to apartments without a terrace. It is, however, too early to conclude whether or not these changes are temporary or permanent. The indices and indicators that I construct are available on my website www.svendamen.com/hedonic and updated every year in January.

Who demands peri-urban nature? A second stage hedonic house price estimation of household’s preference for peri-urban nature

We analyze housing markets in a suburb north of the Danish capital Copenhagen. There the concentration of affluent households decreases rapidly with distance to nature. This indicates systematic differences in preferences that are highly correlated with demographics. We assess if and to what extent this is the case by conducting a second-stage hedonic house price study, where we recover household-specific preferences for the availability of peri-urban nature. Preference parameters are identified locally through restrictions on household utility functions. We assess the relationship between demographic factors and household Willingness To Pay for nature availability across the Willingness To Pay distribution. The results of the analysis show that households paid on average 968 EUR per year for the level of peri-urban nature they have available from their home. In extreme cases, some households paid more than seven times the average amount.Willingness To Pay for peri-urban nature increases with income and wealth across the entire population. However, an increase in income will increase Willingness To Pay more for households at the lower end of the willingness to pay distribution, compared to the effect at the high end of the Willingness To Pay distribution. Furthermore, increases in education levels are related to higher willingness to pay in the middle of the willingness to pay distribution, whereas further education has less impact on households with high willingness to pay. Single parent status, car ownership, and other factors also affect Willingness To Pay for nature availability.Our study contributes to the discussion of the distributional aspects of environmental policies with results based on a revealed-preference method where households face a real and binding budget constraint. Our results show that the socio-economic distribution of changes in amenity values is a relevant factor to consider when evaluating policies that affect the provision of nature close to urban areas.

Urban Housing Prices and Regional Integration: A Spatial Analysis in the City of Kaifeng, China

Regional integration is increasingly used as a policy strategy to accelerate urban development and regional cooperation. This research assesses the effects of regional integration on housing prices to evaluate policy effectiveness for small and medium-sized cities on the peripheries of core cities. Taking as a case study the Chinese city of Kaifeng—a contiguous city in the Zhengzhou megaregion—we utilized hedonic house price modelling and spatial econometrics to investigate the effect of Kaifeng’s integration with the core city on the dynamics and determinants of housing prices between 2001 and 2016. The results show that housing prices in Kaifeng increased significantly after the city’s integration with Zhengzhou in 2005. Further, the results confirm that the regional integration had a significantly positive effect on housing prices, especially in border areas. Moreover, the new time-saving cross-border light rail system had more influence on the prices of nearby housing than the new expressway, and new urban districts with high-quality amenities led to a sharp rise in housing prices in Kaifeng. Our findings offer policymakers some guidance concerning regional cooperation and urban development.

Türkiye de Reel Konut Fiyatlarında Balonların Varlığı Üzerine Uygulamalı Bir Analiz

The detection of price bubbles, which are expressed as increases in asset prices due to speculative movements, can provide information regarding potential financial imbalances that may arise in the future. Upon considering that the Mortgage crisis, which is the last international financial crisis and affected the whole world, was caused by the price bubbles in the housing prices, it is of economic importance to determine whether or not such bubbles occur in the housing prices on the national scale. This study aims to determine whether or not price bubbles occur in housing prices in Turkey. In this context, it is tried to be examined whether or not price bubbles occurred in Turkey via the Sup-Augmented Dickey-Fuller and the Generalized Sup-Augmented Dickey-Fuller tests utilizing the monthly data of the real hedonic housing price index obtained from the cities of Ankara, Istanbul, and Izmir over the period from January 2010 to December 2018. According to the study results in both test results, the existence of housing price bubbles in the cities of Istanbul and Izmir is detected. The Sup-Augmented Dickey-Fuller test results indicate that housing price bubbles occur in Ankara, whereas no housing price bubbles are detected in the city according to results obtained from the Generalized Sup-Augmented Dickey-Fuller test.

House prices in the Ottoman Empire: evidence from eighteenth‐century Edirne†

AbstractThis study uses a new dataset of 2,246 notarial deeds of house sales from one of the major cities of the Ottoman Empire, Edirne, covering the period from 1720 to 1814. It estimates real hedonic house prices and urban wealth inequality for the housing market. It shows that house size, proximity to the commercial centre, access to fresh water, and family ties were important determinants of relative house prices. These findings also apply to the different quartiles of the market, indicating limited market segmentation. It demonstrates that there was an increase in housing wealth inequality during the eighteenth century as house prices became more dispersed. The hedonic house price index provides evidence that inflation‐adjusted house prices declined substantially following the Russo‐Turkish war of 1768–74. The decline is mainly explained through demographic shocks induced by plague epidemics, natural disasters, and other population movements driven by wars, army mobilization, and political upheavals.

The Role of Distance‐Dependent Versus Localized Amenities in Polarizing Urban Spatial Structure: A Spatio‐Temporal Analysis of Residential Location Value in Columbus, Ohio, 2000–2015

This study examines the relative effects of distance‐dependent versus localized amenities in changing urban spatial structure of residential location values within urban areas. We also investigate the spatio‐temporal patterns of neighborhood value, which is the sum of distance‐dependent and localized amenity effects, at a local community scale. We use a hedonic housing price model that controls for residential property characteristics to distinguish the effects of distance‐dependent and localized amenities that manifest in housing prices. We also utilize kriging and spatial statistics to examine the relative contributions of these effects to increasing spatial polarization between high‐valued versus low‐valued neighborhood locations. We conduct this analysis using a georeferenced housing transactions database containing almost 480,000 parcel‐level home sales during the period 2000–2015 within the urbanized area of Columbus, Ohio, USA, a highly segregated city. Results demonstrate the dominant and major role of localized amenity effects in shaping the polarized urban spatial structure of housing prices and neighborhood value. Quantitatively, we find a tripling of the Moran's I values of the neighborhood value, meaning deepening, and worsening divide between high‐valued versus low‐valued residential locations.

Measures of labour market accessibility. What can we learn from observed commuting patterns?

It is well known that measures of labour market accessibility explains spatial variation in housing prices even in markets with polycentric labour market structures. This paper examines whether data on observed commuting patterns can replace or supplement gravity-based measures representing the commuting potential at specific locations. We use data from a region in Western Norway,and we find that measures based on observed commuting flows and commuting time cannot replace a gravity-based measure of labour market accessibility. Based on, inter alia, the spatial Durbin estimator we find that measures of observed commuting flows increase the explanatory power of a hedonic house price model.

The Effect of Credit Supply on House Prices: Evidence From Turkey

ABSTRACTThis article examines the effect of exogeneous credit supply shocks on house prices in an emerging economy, Turkey, using bank deposits, the number of branches, and financial literacy as instruments to estimate exogenous credit supply. Utilizing data for 26 regions and from 2010 to 2017, I find that an exogenous expansion in housing credits as well as consumer credits utilized has a large and significant effect on prices. A similar effect holds for quality-adjusted hedonic house prices. The results have important policy implications for credit-driven emerging economies.

An analysis to detect exuberance and implosion in regional house prices in Turkey

The aim of this paper is to find out whether there is exuberance in regional house prices in Turkey. For this purpose, we analyze real hedonic house prices and price to rent ratios countrywide as well as for 26 geographic regions at the NUTS2 level from January 2010 to January 2019. We perform the right-tailed unit root testing procedures developed by Phillips et al. (2015) and Phillips and Shi (2018) and use their real time date-stamping strategy to determine periods of explosiveness and implosion. Our empirical findings indicate that there were exuberance episodes in house prices in Turkey for multiple periods, where an important contributor to these dynamics was the largest housing market, İstanbul. We also detect exuberance in some other regions, particularly in the neighboring NUTS2 regions of İstanbul and in İzmir after around 2014. However, we find out that explosive price behavior turned into implosion in many regions starting from 2018.

A comparative study on the value of scenic views between an inland and a coastal city in Korea

ABSTRACTThis study estimates hedonic house price models for an inland city of Seoul and a coastal city of Pusan using spatial regression with successful bidding price data of court auction during the period from January 2006 to December 2014. Among hedonic attributes such as floor area, building age, total floor level, living floor level, direction of the window of the living room, proximity to natural environment, scenic views and others employed in this study, our main focus is on scenic views. As a result of our empirical analysis, the most preferred view turns out to be a water-related view such as a broad river view in Seoul or an ocean view in Pusan. A mountain view, affecting negatively in a coastal city like Pusan which is adjacent to the beautiful ocean, has positive influence in Seoul, since it is an inland city with no ocean in sight with only a river running across the heart of the city which is surrounded by mountains serving as its boundary. While a building view in Seoul has negative effect on the price, it affects positively in Pusan.

Real estate prices and stock market in Germany: analysis based on hedonic price index

PurposeReal estate and stocks are two major asset types in an investor’s portfolio. Therefore, this paper aims to investigate the relationship between these two markets to provide a valuable insight into the process of portfolio optimization and security selection.Design/methodology/approachThis study examines the long-run relationship between residential real estate prices and stock market index in the case of Germany for the period of 2005-2017 by applying time series econometrics techniques. To this aim, this study uses Hedonic House Price Index as a proxy for real estate prices and DAX30 as a proxy for stock prices. Moreover, three additional variables, namely, consumer confidence, credit availability and supply of mortgage loans, are incorporated as control variables to assess the robustness of the results.FindingsObtained empirical results indicate a long-run relationship between stock prices and real estate prices which suggests that in long-run, there is no diversification benefit from allocating stock and real estate assets in a portfolio. This finding is especially important for long-term investors such as pension funds.Originality/valueTo the authors’ best knowledge, this is the first study that empirically investigates the relationship between the real estate market and stock prices using the Hedonic Price Index for the case of Germany.

Fast Geographically Weighted Regression (FastGWR): a scalable algorithm to investigate spatial process heterogeneity in millions of observations

ABSTRACTGeographically Weighted Regression (GWR) is a widely used tool for exploring spatial heterogeneity of processes over geographic space. GWR computes location-specific parameter estimates, which makes its calibration process computationally intensive. The maximum number of data points that can be handled by current open-source GWR software is approximately 15,000 observations on a standard desktop. In the era of big data, this places a severe limitation on the use of GWR. To overcome this limitation, we propose a highly scalable, open-source FastGWR implementation based on Python and the Message Passing Interface (MPI) that scales to the order of millions of observations. FastGWR optimizes memory usage along with parallelization to boost performance significantly. To illustrate the performance of FastGWR, a hedonic house price model is calibrated on approximately 1.3 million single-family residential properties from a Zillow dataset for the city of Los Angeles, which is the first effort to apply GWR to a dataset of this size. The results show that FastGWR scales linearly as the number of cores within the High-Performance Computing (HPC) environment increases. It also outperforms currently available open-sourced GWR software packages with drastic speed reductions – up to thousands of times faster – on a standard desktop.

Accuracy and Determinants of Self-Assessed Euro Area House Prices

Using microdata from the second wave of the Household Finance and Consumption Survey, we investigate the accuracy of property values estimated by homeowners - so called “self-assessed” house prices - and explore the drivers of possible deviations of these prices from official hedonic house price indices. We find evidence that euro area homeowners overestimate the value of their properties by around 9%. Across the largest euro area countries, the overestimation lies in a range between 3.2% in Germany and 22% in Italy. Household characteristics, including the level of indebtedness, appear to explain significant discrepancies between hedonic and self-assessed house price indices, while the limited available data related to property characteristics are generally not affecting this gap. For the euro area, we find that higher self-assessed house prices are associated with a mild increase in consumption expenditures.

Hedonic Price Ripple Effect and Consumer Choice: Evidence from New Homes

This study uses the hedonic price model to examine the determinants of house prices. It employs kernel density to estimate the spatial weight matrix and conducts spatial econometrics and instrumental variables quantile regression analysis. Taking a new building in Shanghai city as an example, this micro-perspective study shows that hedonic prices of houses are derived from consumer hedonic preferences and their changes in terms of inertia and spatial ripple effects. However, there are large differences in the drivers of the same hedonic attribute across quantile degrees. With house prices gradually decreasing from the city center to the surrounding areas, the ripple effect is significant in determining residents’ preferred consumption characteristics and presents several inverted U-shaped and inverted U-shaped relationships. Residents’ preference for housing consumption is mainly reflected in the average area of the house, property fee, location of the administrative area, and so on. Regional real estate price changes are mainly reflected in hedonic house prices, and real consumer demand for housing is mainly derived from hedonic preference. Therefore, government regulation and control of house prices should consider different regions and different consumer groups simultaneously.

(Under)Mining local residential property values: A semiparametric spatial quantile autoregression

SummaryRock mining operations, including limestone and gravel production, have considerable adverse effects on residential quality of life due to elevated noise and dust levels resulting from dynamite blasting and increased truck traffic. This paper provides the first estimates of the effects of rock mining—an environmental disamenity—on local residential property values. We focus on the relationship between a house's price and its distance from a nearby rock mine. Our analysis studies Delaware County, Ohio, which, given its unique features, provides a natural environment for the valuation of property‐value‐suppressing effects of rock mines on nearby houses. We improve upon the conventional approach to evaluating adverse effects of environmental disamenities based on hedonic house price functions. Specifically, in the pursuit of robust estimates, we develop a novel (semiparametric) partially linear spatial quantile autoregressive model which accommodates unspecified nonlinearities, distributional heterogeneity, as well as spatial dependence in the data. We derive the consistency and normality limit results for our estimator as well as propose a consistent model specification test. We find statistically and economically significant property‐value‐suppressing effects of being located near an operational rock mine which gradually decline to insignificant near‐zero values at roughly a 10‐mile distance. Our estimates suggest that, all else equal, a house located a mile closer to a rock mine is priced, on average, at about 2.3–5.1% discount, with more expensive properties being subject to larger markdowns.

Accounting for Spatial Variation of Land Prices in Hedonic Imputation House Price Indices: a Semi-Parametric Approach

Abstract Location is capitalized into the price of the land the structure of a property is built on, and land prices can be expected to vary significantly across space. We account for spatial variation of land prices in hedonic house price models using geospatial data and a semi-parametric method known as mixed geographically weighted regression. To measure the impact on aggregate price change, quality-adjusted (hedonic imputation) house price indices are constructed for a small city in the Netherlands and compared to price indices based on more restrictive models, using postcode dummy variables, or no location information at all. We find that, while taking spatial variation of land prices into account improves the model performance, the Fisher house price indices based on the different hedonic models are almost identical. The land and structures price indices, on the other hand, are sensitive to the treatment of location.

How Does Tourism Penetration Affect House Prices? Evidence From Crete, Greece

This study examined the relationship between tourism penetration and house prices. We used a very touristic place, Crete, which is a major Greek island, as a case study to test research hypotheses. With data from 2006 to 2012, we constructed tourism indicators for the four prefectures of Crete. Then by using principal component analysis (PCA) we created a tourism penetration rate (TPR) for each prefecture and ranked them in terms of tourism penetration. In the second stage of the analysis, we performed a hedonic house price regression analysis. We established empirical findings that (i) the TPR of a prefecture has a significant effect on house prices of the prefecture and (ii) house prices are affected by the TPR of the neighboring prefectures, indicating statistically significant tourism spillover effects. The findings, although significant, show asymmetric effects that confirm both the impact of tourism penetration on house prices and the presence of spillover effects across Crete Island. Models were tested for robustness across several specifications. The analytical framework drawing from tourism and housing economics literature is repeatable across regions with a significant tourism sector.

A New Approach to Estimating Hedonic Equilibrium Models for Metropolitan Housing Markets

We formulate and estimate a new equilibrium model of metropolitan housing markets with housing differentiated by quality. Quality is a latent variable that captures all features of a dwelling and its environment. We estimate the model for Chicago and New York, obtaining hedonic housing price functions for each quality level for each metropolitan area, stocks of each quality, and compensating variations required for a household of a given income in Chicago to be equally well off in New York.