Hedonic Index Research Articles

A pricing model for Container-as-a-Service, based on hedonic indices

Container-as-a-service (CaaS) is a business model that facilitates software developers in organizing, running, managing, and deploying applications using container-based virtualization. The CaaS market is a fast-growing one, leading infrastructure-as-a-service (IaaS) providers into offering CaaS solutions built on top of their IaaS platforms. Given the increasing competition among providers, pricing strategies play a key role in determining the business prospects of CaaS.In this work we propose a methodology to analyze the pricing strategies of the providers, based on a hedonic regression. Following that, we also develop a hedonic price index, based on data collected from popular providers, by identifying a wide set of architectural requirements influencing the pricing strategy. We further analyze the correlations between these requirements and define the subset to be included in the regression analysis, interpreting the results in view of the underlying CaaS market characteristics. The model implementation and the data set are freely available on the web under an open-source license.

Location, location, location!*: a quality-adjusted rent index for the Oslo office market

PurposeCommonly used rent indices are based on average developments or expert opinions. Such indices often suffer from compositional biases or low data coverage. The purpose of this paper is to overcome these challenges using the authors' approach.Design/methodology/approachThe authors construct a quality-adjusted rent index for the office market in Oslo using detailed data from 14,171 rental contracts.FindingsThe authors show that compositional biases can have a large impact on rental price developments. By adding building-fixed effects to a standard hedonic regression model, the authors show that the explanatory power increases considerably. Furthermore, indices excluding location-specific information, or which include less granular location controls than at the building level, portray quite a different picture of rent developments than indices that do take this into account. The authors also exploit information on contract signature date and find that a more timely detection of turning points can be achieved by using the signature date instead of the more typically used start date of the lease.Research limitations/implicationsThe study is confined to Norwegian data, and an avenue for future research would be to explore if similar results are obtained for other countries. A weakness with the paper is that authors' do not observe quality changes over time, such as renovation. Controlling for time-varying and unit-specific attributes in hedonic models for the commercial real estate (CRE) market would be useful to purge indices further for compositional effects and unobserved heterogeneity. While the authors do control for building-fixed effects, there are additional variations within a building (floor, view, sunlight, etc.) that the authors do not capture. Studies that could control for this would certainly be welcome, both in order to estimate the value of such amenities and to see how it affects estimated rent developments. Another promising avenue for future research is to link data on rental contracts in the CRE market with firm-specific information in order to explore how firm profitability and liquidity may affect rental contracts.Practical implicationsThe authors show that the hedonic index yields a sharper fall in rents after the global financial crisis and more muted developments in the period between 2013 and 2015 than the average rent index. The results show that rents have followed their estimated equilibrium closely and have re-adjusted quickly in periods of deviation. From a financial stability perspective, the risk of a sharp fall in rents is reduced because rents often are in line with their fundamentals.Social implicationsThe authors find that a more timely detection of turning points can be achieved by using information on the signature date. This is an important finding. The financial system is heavily exposed toward CRE, and timely detection of turning points is critical for policymakers.Originality/valueThe financial system is heavily exposed toward the commercial real estate market and timely detection of turning points is of major importance to policymakers. Finally, the authors use our quality-adjusted rent index as the dependent variable in an error correction model. The authors find that employment and stock of offices are important explanatory variables. Moreover, the results show that rents have followed their estimated equilibrium path.

Running costs indices for commercial buildings using the hedonic price imputation approach: a case of Sri Lanka

Running expenses of a building consume a substantial share of its total life cycle cost and range between 70 and 80% in commercial buildings. Despite this, investment decisions are primarily based on construction costs due to the absence of a reliable estimate or forecast of costs in-use. In such a context, having running cost indices that incorporate building characteristics would enable investors to predict the running costs of a building at the early phase. This study is aimed at developing running cost indices for commercial buildings by taking Sri Lanka as a case. The running costs and building characteristics data were collected from a sample of 46 commercial buildings and analyzed using the hedonic price imputation approach, which enables the prediction of costs in absence of cost/quantity data. The hedonic indices developed in the study shows an increasing trend of running costs with varying degree of 0.37, 0.30, and 0.28% quarterly for offices, banks, and all commercial buildings, respectively. This prediction of trend would assist commercial developers to capture the movement of the running costs of commercial buildings and thereby optimize the running costs in the early design stage. This study further highlights the hedonic price imputation approach as a promising method for constructing index values where there is no adequate and reliable historical cost data.

Reducing revisions in hedonic house price indices by the use of nowcasts

National Statistical Institutes (NSIs) must balance between timeliness and accuracy of the indicators they publish. Because some of the house sales transactions are reported several months after they occur, many countries that include Israel, publish provisional house price indices (HPIs) that are subject to large revisions as further transactions are reported. This happens because the late-reported transactions behave differently from the transactions reported on time. In this paper, we propose a novel methodology to minimize the size of the revisions, with illustrations from Israel, but the method can be applied to other countries with appropriate modifications. The proposed methodology consists of nowcasting three types of variables at a subdistrict level and adding them as input data to an extended hedonic model used for the computation of the HPI: (1) the average characteristics of the late-reported transactions such as the average number of rooms and the area size of the sold apartments; (2) the average price of the late-reported transactions; and (3) the number of late-reported transactions. The three variables are nowcasted based on models fitted to data from previous months. Evaluation of our methodology shows more than 50% reduction in the magnitude of the revisions.

The COVID-19 Pandemic, Airbnb and Housing Market Dynamics in Warsaw

In this study, we analyse the impact of COVID-19 on house rents and prices in Warsaw, the capital of Poland. Hedonic indexes indicate a slight increase in prices (ca. 1.2%) and a substantial drop in long-term rents (ca. -7.7%) between March 2020 and December 2020. The largest decline in rents occurred in centrally located neighbourhoods, which was largely due to the inflow of new housing supply from the short-term rental market (the Airbnb Warsaw market shrank by almost 30% in December 2020 y/y). Using hedonic methods, we show the effect of the shrinking Airbnb market on the drop in long-term rents. The study indicates the elasticity of rents with respect to Airbnb supply, with a 1% change in Airbnb listings leading to a 0.031% change in rents.

A hedonic assessment of the relative importance of structural, locational and neighbourhood factors on advertised rents in Malta

PurposeThe private rental market in Malta has expanded significantly in recent years, but as at 2020, no official rent index is yet published. This paper aims to construct such an index and explores the relative importance of structural, locational and neighbourhood factors to advertised rents.Design/methodology/approachThe authors compile hedonic indices for advertised rents in Malta collected from publicly available sources using webscraping techniques. The database comprises more than 25,000 listings with information on various property attributes. Hedonic regressions are estimated using ordinary least squares and rent indices are computed using three alternative methods: the time dummy method, the rolling time dummy method and the average characteristics method. For the latter, indices are computed using the Laspeyres, Paasche and Fisher methods.FindingsThe results from the hedonic indices indicate that the annual growth rate in advertised rents was slowing down during 2019, albeit still remaining relatively high, while in 2020, advertised rents contracted sharply, amplified by the effects of COVID-19. The findings also reveal that advertised rental prices are significantly influenced by various structural, locational and neighbourhood factors.Originality/valueThis paper introduces the first rent index in Malta that will be used to monitor developments in the rental segment of the housing market and for financial stability purposes given the share of buy-to-let properties. It also provides various elasticities on the impact of property attributes on advertised rents in Malta. Finally, the study contributes to the literature on the effect of foreign-born residents on advertised rents.

Hedonic Price Index Number for New Blocks of Flats and Terraced Houses in Finland

Statistics Finland has relatively long experience in constructing indices of prices of old flats using the hedonic approach where regression analysis and classification of flats (i.e. stratification) are combined. Practically this means: First the price model is based on the fixed effect model applied for separate regions and second the quality adjustment is performed within each regional cell in a classification (i.e. inside stratums) using so called Oaxaca decomposition. The hedonic price index is computed by aggregating regional cell level (i.e. stratum level) quality adjusted prices using the logarithmic Laspeyres formula. In this study we develop hedonic price index for new flats. In outline, we use similar methods as in case of old flats, but we develop Oaxaca decomposition in the cell or stratum level for unweighted and weighted arithmetic and geometric means – these are our first new results for hedonic methods. For that we develop new theorems for price aggregation from observed prices into stratum aggregates by logarithmic mean. New theorems of price aggregation are performed to semilogarithmic price models. Our price aggregation form observation level into strata leads to three new decomposition average prices – decompositions for unweighted arithmetic average prices and weighted arithmetic and geometric average prices. The stratum level Oaxaca decomposition for different price aggregates, that is, quality adjusted price changes and quality corrections, are aggregated using several basic (i.e. Laspeyres, Paasche, log-Laspeyres, log-Paasche,…) and excellent index number formulas (i.e. Tornqvist, Fisher, Mongomery-Vartia,…). The price aggregation is performed separately for weighted and unweighted arithmetic and geometric average prices. The construction strategy of index series in this study is based on the base strategy. By this strategy index series are free of chain error (or drift). Our test data is a high-quality register data on all free-market transactions of dwellings in new blocks of flats and terraced houses. Data includes statistical unit specific information of unit prices, quantities, values and of some unit specific quality characteristics form 2010/I to 2018/IV being quarter data. The quarter data includes about 2000 – 3000 observation per a quarter.

Comparing Basic Averages, Index Numbers and Hedonic Methods as Price Change Statistic

Measurement of price change is based on averages - also, hedonic price index numbers. As NSIs obtain scannerdata having varying content, question arise: what is correct average to use? We compare in this paper price change estimates based on most known averages and index numbers including quality adjusted methods. All analysis is done in logarithmic scale. The statistical analysis of our data is based on graphical presentations and mathematical analysis is presented mostly in our earlier papers.

Hedonic Index Numbers for Rents of Office and Shop Premises in Finland

The focus of the study is to join together regression analysis and index numbers to get quality adjusted price change for rents of office and shop premises. First, we apply simple semilogarithmic linear price models, the fixed effects model (FE), and estimate them by the OLS method. We weight these estimated equations from observations into stratums for unweighted and weighted arithmetic and geometric averages such that the basic algebraic properties of the OLS method are satisfied. We show that the aggregation leads to reparameterization of the FE’s (here stratum effects) of the OLS method for the unweighted and weighted arithmetic and the weighted geometric averages. The solution for the unweighted geometric average is trivial and shown in any statistical textbooks. Second, we apply the Oaxaca decomposition (1973) for the aggregated price models (i.e. stratum aggregates) for these four basic averages and divide the actual price change of these averages into two parts: into quality correction and quality adjusted price changes. For these Oaxaca decompositions of different averages, we apply index number theory to estimate price changes for crude aggregation levels. All our analysis, including the basic and excellent index number formulas (see Vartia and Suopera, 2018), are based on their logarithmic representations. Our focus for the use of the logarithmic representations culminates into the theorem of additive decomposition of the value change by which we can compare the price change estimates based on unit values (i.e. weighted arithmetic averages) and especially Montgomery-Vartia price index. We show explicitly that inadequate control of rented squares leads to serious bias – the actual price change includes not only price changes but also quantity changes, which may dominate causing serious bias for price index numbers. Our test data comes from the KTI Property Information Ltd covering large municipals in Finland. The data do not include certain ID-key for the construction of bilateral price-links and thus a hedonic method is our approach to measure price index for rents of office and shop premises. The weighting into the population level is at the moment impossible because lack of data, we make all inference only for the conditional information set of our data. All statistical and mathematical methods in this study are programmed by the SAS and the user interface for the official production of statistics by the SAS EG.

Türkiye Konut Piyasasında Zayıf Formda Etkinlik Analizi: Makroekonomik Bakış

The aim of this study is to look for an answer to the question of “Is it possible to discuss the existence of an efficient market for the housing market in Turkey?”. It was observed that relatively low housing (mortgage) interest rates were accompanied by price rigidity. Accordingly, in the formation of the housing market definition from the Central Bank (CBRT) database; an empirical analysis was made using the Residential Property Price Index for New Dwellings (NRPPI), the Residential Property Price Index for Existing Dwellings (ERPPI), the Residential Property Price Index (RPPI) and the Hedonic House Price Index (HHPI). The data range for the first three indices is between 1/2010 and 1/2020. Hedonic housing price index data range is between 1/2011 and 1/2020. Unit root tests were used to test the Random Walk Theory, which shows the characteristic condition of the housing market. The results from the study show that above average sustainable returns cannot be obtained from the housing market, as a result the market is poorly efficient. At the same time the housing market in Turkey, the rigidity of prices found along with excess supply situation is worrisome. Therefore, it is necessary to prevent all kinds of manipulative news that may occur in the housing market by the regulatory and supervisory institutions.

COVID-19 and Housing Prices: Australian Evidence with Daily Hedonic Returns

Using daily hedonic housing price index for five Australian capital cities, we document a negative relationship between prior COVID-19 cases and daily housing returns. Specifically, the daily housing return drops by 0.35 basis points or 1.26 percentage points annually for every doubling of newly confirmed COVID-19 cases in a state. We also examine the effect of government lockdown orders on housing returns and find insignificant results. These findings are robust under alternative pandemic proxies such as total active COVID-19 cases and other model specifications. Overall, our paper contributes to the literature on the geographic spread of pandemics and real estate prices.

COVID-19 and Housing Prices: Australian Evidence with Daily Hedonic Returns

Using daily hedonic housing price index for five Australian capital cities, we document a negative relationship between prior COVID-19 cases and daily housing returns. Specifically, the daily housing return drops by 0.35 basis points or 1.26 percentage points annually for every doubling of newly confirmed COVID-19 cases in a state. We also examine the effect of government lockdown orders on housing returns and find insignificant results. These findings are robust to using total active COVID-19 cases and other model specifications. Overall, our paper contributes to the literature on the geographic spread of pandemics and real estate prices.

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.

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.

Hedonic Price Index Number for New One-Family Detached Houses in Finland

Hedonic Price Index Number for New One-Family Detached Houses in Finland

Economic policy uncertainty and house prices in Germany: evidence from GSADF and wavelet coherence techniques

PurposeThis study aims to answer the following questions which have not been investigated in the literature to the best knowledge: Is there any bubble in the German housing sector between 2005–2009 and 2012–2017? and Is there any linkage between economic policy uncertainty and the housing sector price index?Design/methodology/approachThis study aims to shed some light on the German’s housing sector by investigating the housing sector bubble and the causal link between the housing sector index and economic policy uncertainty in Germany, using GSADF, Granger causality, Toda Yamamoto causality and wavelet coherence tests.FindingsThe findings reveal that there are some bubbles in the housing sector in Germany for the periods investigated, there is a positive correlation between economic policy uncertainty and housing sector price index at different frequencies and different periods and between 2008 and 2009 and between 2011 and 2013, economic policy uncertainty leads housing sector price index. The consistency of the findings from wavelet coherence is confirmed by the outcomes of Granger causality and Toda Yamamoto causality tests.Originality/valueTo the best knowledge, this is the first study that empirically investigates the relationship between the housing sector and EPU using a novel wavelet econometric method. In addition, this paper extends the research focused on the associations between the housing sector and EPU, by checking the bubbles in the market in different time horizons by using the longest available data span. Furthermore, the consistency of the findings from wavelet causality is confirmed by the outcomes of Granger causality and Toda Yamamoto causality tests. Finally, compared to the previous literature on the relationship between housing and EPU, the study uses a hedonic index for housing for the first time in the case of Germany.

Information value of property description: A Machine learning approach

This paper employs machine learning to quantify the value of “soft” information contained in real estate property descriptions. Textual descriptions contain information that traditional hedonic attributes cannot capture. A one standard deviation increase in the uniqueness of a property based on this “soft” information leads to a 15% increase in property sale price in a hedonic price model and a 10% increase in a repeat sales price model. The effects in the hedonic model appear to arise through two channels: the unobserved quality of the housing unit, and the market power of the housing unit relative to competing properties. The effects in the repeat sales model appear to be driven entirely by the market power of the unit. Further, an annual hedonic price index ignoring our measure of unobserved quality overstates real estate prices by between 10% to 23% and mistimes the stabilization of housing prices following the Great Recession. Similar, but smaller effects, are observed for the repeat sales price index.

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.

Investments in Contemporary Russian Artwork as an Alternative Form of Investment

In the last decades of the 20th century, various classes of alternative investments have become increasingly popular among investors. During this time, art as a form of alternative investment attracted attention not only from potential buyers but also from academic scholars. Unfortunately, only a few of the newly published papers contained any quantitative analysis with regard to art’s investment performance. Besides, even a smaller amount of research was devoted to the analysis of Russian art markets. Therefore, the purpose of this work is to evaluate the efficiency of investments in the artworks of contemporary Russian painters and to compare the effectiveness of these investments with the effectiveness of investments in stock, bond and real estate markets in Russia and the USA. For this research, we first conduct a hedonic regression analysis on the data available for 1950-2019 time period. After that, we build a hedonic price index for the canvases of contemporary Russian artists. According to the results, the trend of this index reiterates largely the price behavior for world contemporary art market. However, the results of this study indicate that investments in contemporary Russian art do not outperform investments in instruments of Russian and American capital and real estate markets. These results were derived by applying the CAPM model which demonstrated that Russian art as a form of alternative investment is not advisable for the purposes of diversification of investment portfolios. Based on these findings, contemporary Russian art in general can be considered an unattractive instrument for Russian and foreign investors.

Comparison of Three Domestications and Wild-Harvested Plants for Nutraceutical Properties and Sensory Profiles in Five Wild Edible Herbs: Is Domestication Possible?

In this study, five wild edible herbs traditionally consumed in the Tuscany region (Italy) were evaluated for their potential in human nutrition. The nutraceutical characterization of Rumex acetosa, Cichorium intybus, Picris hieracioides, Sanguisorba minor, and Plantago coronopus, as well as their sensory profile were reported. Additionally, a preliminary assessment of completely different domestication of the wild species (named “soilless”, pot, and open field) was conducted to verify the possibility of their marketability, which is impossible if the plants are only gathered as wild. The open field domestication allowed to obtain plants with nutraceutical and sensory profiles similar to those of the wild species, especially in C. intybus, P. hieracioides, and S. minor. The pot domestication allow to obtain plants with chlorophyll and carotenoid contents close to those of the wild species, as well as a lower total phenolic and flavonoid content and ascorbic acid content than wild species. In the “soilless” method, R. acetosa and P. coronopus exhibited a high quality in terms of phytochemicals and antioxidant activity. Afterward, the sensory profile was strongly affected by the domestication in terms of the palatability, except for R. acetosa and P. coronopus, which displayed Hedonic Index (HI) values close to the consumer acceptability limit (HI = 6). A sensory profile similar to that of wild species was reported in open field domestication, whereas a worse sensory profile was reported in P. hieracioides and C. intybus domesticated using the soilless method. Finally, according to the preliminary assessment carried out in this study through an analysis of the general nutraceutical properties, S. minor was shown to be the most promising species thanks to its intrinsically highest nutraceutical properties considering the marketability of wild edible herbs as “new” functional food. However, further research on the bioavailability and bioactivity tests of nutraceutical compounds present in this species are required to confirm the findings of this study.