Hedonic Price Method Research Articles

A comprehensive approach to predict auction prices and economic value creation of cricketers in the Indian Premier League (IPL)

The Indian Premier League (IPL), the most successful cricket tournament in India, has immensely grown in popularity. Unlike similar tournaments like Major League Baseball and the UEFA Champions League, their models cannot be replicated due to the dynamic pricing nature of player auctions. The research intends to generate a predictive model that predicts the auction price of a player using key quantitative variables. The players were categorised by batsmen, bowlers, and all-rounders. Due to the holistic hedonic nature of the model, equations were formed to predict a player’s future performance, in terms of measurable points, and to extrapolate economic value creation given a budget constraint. This study provides insights on the player’s economic value by comparing the auction price paid vs. the player’s actual performance. This new approach to modelling in cricket games not only aims to produce more accurate results using the hedonic pricing method, but also enlightens an introduction to a more holistic modelling process to intricately understand the profiting avenues for team owners to reverse-engineer value additions of players at each level and position. Finally, this model, which considers the factors an IPL franchise would, is being designed to be utilised in future IPL auctions.

The impact of brand affiliation on asset values: the case of UK hotels

ABSTRACT Using the hedonic pricing method, we study more than 400 hotel transactions in the United Kingdom between 2000 and 2015 to determine the impact of brands on hotel market values. We initially find that hotel brands are negatively associated with hotel values in our sample. However, after controlling for endogeneity, we find that brand affiliation produces no significant impact on hotel transaction values. These results suggest that it is the characteristics of branded hotels, rather than the fact of being branded, that determine the transaction values. To the best of our knowledge, this is one of the first studies to examine the impact of brands on hotel values, and the first to account for the role of endogeneity when comparing the transaction value of branded and unbranded hotels.

Modelling apartments values in the Nairobi metropolitan area, Kenya

PurposeThe purpose of this paper is to determine the most significant factors influencing apartment values in Nairobi Metropolitan Area (NMA), Kenya and develop a valuation model using the identified variables. The paper is thus promoting the adoption of advanced, more reliable and accurate valuation methods in developing economies such as Kenya. Therefore, the paper demonstrates the potential of the hedonic pricing method (HPM) in property valuation by making objective adjustments to comparable sales data.Design/methodology/approachThe paper utilizes a case study design by analysing recent (January 2020 to December 2021) apartment sales and apartment attributes in NMA. A sample size of 264 transactions was analysed using the HPM.FindingsThe study identified six significant factors affecting apartment values in the study area: apartment size, location, floor finishes, provision of shopping facilities, swimming pool and gym. A valuation model has been developed using the six variables.Research limitations/implicationsThe paper is contributing to the ongoing global debate on the accuracy, reliability and validity of property valuations with particular emphasis on the developing economies to adopt the more accurate, efficient and reliable valuation approaches.Practical implicationsThe findings are useful to property valuers and estate managers in determining the most statistically significant attributes affecting apartment values in the NMA hence enabling them to offer informed professional advice. However, the findings of the study are limited to the study area since real estate is heterogeneous.Social implicationsProperty investors, financiers and other stakeholders in the society will benefit from the findings of this study in their decision-making process. Additionally, wide adoption of the more reliable and accurate valuation approaches would foster public confidence in valuation and estate management professional services leading to enhanced consumption of these services by the society and promoting public care.Originality/valueThe paper is promoting valuation accuracy, efficiency and reliability in the developing economies by advocating for advanced valuation methods. It is the first attempt to develop a valuation model for apartments in the NMA, the capital city of Kenya and the business hub of East and Central Africa.

Estimating the Effect of Tidal Marsh Restoration on Housing Prices: A Hedonic Analysis in the Nisqually National Wildlife Refuge, Washington, USA

This study employs the hedonic pricing method and a rich spatial and temporal dataset from two counties in Washington, USA to determine the effect of the 2009 Nisqually Restoration project (NRP) on housing prices in adjacent communities. The NRP restored 308 hectares of wetlands via dike removal in the Billy Frank Jr. Nisqually National Wildlife Refuge (NNWR), leading to improvements in salmon and bird abundance and recreational opportunities. We find that the ecological improvements made by the NRP increased the value of homes within 0.5 mile of the refuge by $37,631; homes 0.5 to 1 mile by $10,489; and homes 1 to 1.5 miles by $31,186. Our findings are consistent with previous wetland hedonic price analyses and may be useful inputs in natural resource management and policy decision-making.

Willingness to pay for multiple dimensions of green open space: Applying a spatial hedonic approach

AbstractTo optimize land conservation strategies with limited resources, it is necessary to understand people's preferences and willingness to pay (WTP) for green open space. The hedonic pricing method (HPM) is widely used. However, the conventional HPM assumes no value spillovers between neighbouring properties. Here we adopt a spatial regression approach that allows us to relax the no‐spillover assumption. Through an analysis of access to different types, intensity and developability of open green space on house prices in the City of Edmonton, Canada, we illustrate how spatial HPM can be used to quantify direct and spillover values of different dimensions of open green space. We find that WTP for open space has significant spillover effects, ignoring such spillovers would under‐estimate the total value of open space protection and thus the socially optimal amount of land conservation. All else equal, people are willing to pay most for houses that are close to non‐developable green open space and woodlands. The highest price premiums are for woodlands and non‐developable green open space, followed by living near the University of Alberta farm. On the contrary, people need small compensation to live near large commercial farms. The results suggest a NIMBY attitude toward preservation of commercial agriculture.

Tourist accommodation pricing through peer-to-peer platform: evidence from Seville (Spain)

The expansion of holiday rentals’ worldwide makes it relevant to confirm what are the determinants of these accommodations’ daily rates. This research aims to compare two models on estimating holiday rentals’ daily rate through variables that influence it; using artificial neural networks and hedonic pricing method, with the same cross-sectional dataset and variables with data obtained from Booking.com listings from Seville (Spain), a ‘cultural tourism’ large European city. Artificial neural networks estimations adapt better than the hedonic pricing method due to non-linear relations involved, although hedonic estimators have a clearer economic interpretation. Variables related to size, location and amenities appear as the most relevant in the models, including also seasonal and special events factors. The models presented, not only help to clarify these variables but also allow estimating a rental price congruent with the characteristics of the dwelling and season, being useful as an objective valuation method for the main agents of the accommodation sector: Owners, clients and peer-to-peer platforms. This study wants to highlight the convenience of using Booking.com listings as the main data source, as two variables presented as relevant for the models (size and location) are not available in other peer-to-peer platforms like Airbnb.

The regenerative project for hybrid evolutionary buildings’ Active Resilience Convertibility Enhancement

This paper deals with the enhancement of the project for the intervention on existing disused buildings with three sequential objectives: converting tertiary buildings to the hybrid housing function; regenerating buildings, providing them with continuous transformative capacity and making them functionally convertible; providing a housing model of temporary uage duration, according to the principle of House as a Service. Considering the temporal variable, the proposal defines criteria that guide the reconversion of buildings in relation to the dynamic needs of the different categories of users and stakeholders who are involved in the decision-making process and, through the hedonic price method, investigates the influence that the qualities attributed to the performance of the building have on the formation of their value, highlighting the perception of value and the acceptance of green performances.

Methods to examine omitted variable bias in hedonic price studies

Many studies use the hedonic pricing method to uncover consumers’ willingness to pay for accommodation characteristics in the hospitality industry. In most empirical applications using cross-sectional data, implicit prices might be biased if omitted time-invariant variables correlate with observed attributes. This paper proposes a set of diagnostic checks to inspect the potential bias in the estimates through exploiting repeated information for the same accommodations. Due to the limitations imposed by standard fixed and random effects panel regressions, we advocate for the use of Mundlak and Hausman–Taylor estimators. The proposed methods are applied to a study of Airbnb hedonic prices in Ibiza using a 14-month time window. In doing so, we document a novel finding: Superhosts set lower prices conditional on time-invariant quality.

What Advantages Do Adaptive Industrial Heritage Reuse Processes Provide? An Econometric Model for Estimating the Impact on the Surrounding Residential Housing Market

When industrial relics, such as obsolete buildings, sites, and infrastructures, enter into a process of adaptive reuse, they become transformation engines capable of shaping the urban fabric. They provide tangible and intangible links to our past and have the potential to play a significant role in today’s cities’ futures. One unresolved issue is the quantification of the externalities of these transformation processes. If undertaken correctly, adaptive reuse can contribute to the development of social and cultural capital, environmental sustainability, urban regeneration, and, most importantly, economic benefits to the surrounding community. In this sense, understanding the value of heritage is particularly important in light of the new European urban environmental policy movement based on the circular economy, which aims to change the way Member States consume and produce materials and energy. After a review of the externalities generated by the adaptive reuse of disused industrial heritage, the paper will concentrate on the estimation of economic benefits given by a transformation process that affected Turin’s Aurora district (Northern Italy) during the last years. The hedonic pricing method (HPM) was used to investigate the effects of the construction of new headquarters and the redevelopment of an old power plant converted into a museum and conference center. This study used econometric models to identify a significant increase in market prices within 800 m of the site and calculated a EUR 16,650,445 capitalized benefit from the transformation on the surrounding residential building stock. The study thus contributed to the awareness that reused heritage not only improves the lives of residents, but it also has a positive impact on the real estate market, in terms of transactions, as well as market values.

Contrasting Effects of Air Pollution Assessment in two Areas of the Quito Metropolitan District, Ecuador

One of the main factors of air contamination within urban areas is burning gasoline by cars, light trucks and motorcycles. Gasoline burning liberates pollution gases such as Nitrogen dioxide, Sulfur dioxide, Carbon monoxide, benzene, besides others. Among these, Nitrogen dioxide (NOx) is the one that stands out for the people’s awareness of such contamination. We used the Hedonic Price Method (HPM) in order to determine people’s perception of air quality as a proxy and estimate the effect of gases on the housing market. We selected two areas of Quito Metropolitan District in order to evaluate contamination effects on properties. One with a higher concentration of gases located within the historic district of Quito. The other with better air quality called the Bellavista district. The results of three different models indicated that a reduction of 1 (µg/m3) of NOx would increase an average of 4.54% of the housing market value, which it represents 2,032,326.24 USD in value for sample properties. A decrease of 5 µg/m3 will increase in 22.7% of properties value.

VALUING THE ECOLOGICAL QUALITY OF THE URBAN ENVIRONMENT USING HEDONIC PRICING METHOD

Development of sustainable cities needs the natural and human living in a harmony way. River is an important natural attribute, which has a closed relationship with the development of the city. The purpose of the study is to use hedonic pricing method to assess the economic value of the river in Nanyang city. The novelty of the study lies in the development of econometric models, which use two explanatory variables as metrics of environmental quality – the distance from the residential property to the river and the beauty of the river landscape. Three hedonic pricing models using dummy variables to reflect distance and landscape were developed and analyzed. Simulation results showed that the distance to the river has a positive effect on property price when the distance between them is less than 200 meters. The price of property with river vision will be 9.8 % higher than the price of property without river vision. The results of the study demonstrate a fairly high economic value of the river and the need to implant economic assessments of the ecological quality of the urban environment into the strategic management of sustainable cities’ development

Rethinking urban park irrigation under climate change

Climate change is forcing cities to reassess their water management practices, particularly for water-intensive applications like park irrigation. If water scarcity requires governments to deviate from current park management norms and allocate less water towards parks, it is essential that park managers design spaces that maintain community wellbeing. We apply the hedonic pricing method and use detailed park management information to assess the value of parks in a region where local climatic conditions require extensive irrigation to keep turf green, and where climate change is further constraining water supplies. Here we show that the impacts of irrigation on the value of parks differ depending on the dwelling types of the nearby housing populations that they serve. In most cases, the convention that parks have to be irrigated to deliver ecosystem services to the public is supported. However, we find that non-irrigated park areas are also valued positively by nearby apartment dwellers. Accelerating rates of urbanization and shifts towards high-density living may support the development of more diverse park options that are less water-intensive. Increased visibility of these alternative park forms, which could include more areas of native vegetation that do not require irrigation, may subsequently influence public expectations for landscape design.

Urbanization and Arable Land Use in Northern Ghana: A Case Study of the Sagnarigu Municipality in the Greater Tamale Area

We analyzed the effects of urbanization on the use of arable land in the Sagnarigu municipality in Greater Tamale Area of Ghana. The study involved a random survey of 300 farming households to establish their land-use patterns and valuation, and an analysis of satellite and remote sensing data for the years, 2000, 2010 and 2020 for land-use related land cover changes in the area. Out of 300 responding household heads, 88.3% were usufruct landowners; the remaining 11.7% were tenants. The hedonic pricing method was used to analyse arable land values. The value of arable land was negatively influenced by the distance to the nearest main road, district capital town, and Tamale Central Business District, and positively influenced by its closeness to State institutions. Urbanization, proxied by the population of the community where the land was located, positively influenced the value of the land. Based on the analysis of geographic information system data, we established that the built-up area in the district increased from 13.0 km2 in 2000 to 97.5 km2 in 2020, an increase of 650%. Built-up area accounted for 48.7% of the total land available in the district in 2020.

The Impact of Urban Public Transport on Residential Transaction Prices: A Case Study of Poznań, Poland

This study aims to determine the magnitude and nature of the impact of public urban transport accessibility on the value of residential properties in Poznań. The study was based on 2561 residential transactions completed within the study area in 2020. The input data obtained from the Board of Geodesy and Municipal Cadastre “GEOPOZ” were analysed statistically and spatially. The main part of both the spatial and the statistical analysis was performed using the hedonic pricing method (HPM)-OLS (ordinary least squares) and WLS (weighted least squares). The use of statistical tools enabled the finding of evidence to prove that the convenient accessibility of trams is positively related to housing prices. This has also been confirmed by previous research works conducted in other parts of the world. However, the collected data did not enable the identification of statistically significant relationships between housing prices and the distance from bus stops. The study also attempts to use spatial choropleth maps to clearly illustrate the mechanisms within the local housing market.

Urban Green infrastructures: How much did they affect property prices in Singapore?

In 2015, 17 Sustainable Development Goals were outlined within the 2030 Agenda by the United Nations. Objective 11.7 aims to provide universal access to safe, inclusive, and accessible green and public spaces, highlighting the strategic role of these areas in cities. In the international literature, the theory of Ecosystem Services (ESs) has been developed to raise public awareness of the need to preserve biodiversity, enhance community cohesion, civic identity, and quality of life. In this study, we explored the economic value of Singapore's Urban Green Infrastructures (UGI) by investigating the private condominium and apartment unit market through the Hedonic Pricing Method (HPM). The HPM was integrated with Geographic Information System (GIS) to spatialize housing units, measure the distance of different green spaces, and consider the dependence effects among housing unit transactions. The results highlighted a positive effect on values of the proximity to the natural green areas, as well as to the regional, city parks, and small nature areas. The annual benefits of UGIs on households within 800 m range from 10,305,275 USD for nature areas to 59,723,703 USD for the city parks and 74,011,689 USD for the regional parks. Estimates showed the small contribution of park connectors (PCN) and neighborhood parks. The HPM results are a useful aid to understanding the amenity value of UGIs. The modeling outcomes could be used to inform policymakers and municipal green managers about UGIs preservation and new allocation starting from households’ preferences.

Computational Valuation Model of Housing Price Using Pseudo Self Comparison Method

Hedonic pricing method (HPM), which is commonly used for estimating real estate property values, considers the property’s internal and external characteristics for its valuation. Despite its popularity, however, the method lacks the mechanism that directly reflects the target property’s price fluctuation and the real estate market’s volatility over time. To overcome these limitations, we propose Pseudo Self Comparison Method (PSCM), which reduces the real estate valuation problem to finding a pseudo self, which is defined as a housing property that can most closely approximate the characteristics of the target housing property, and adjusting its previous transaction price to be in sync with the real estate market change. The proposed PSCM is tested for two scenarios in which the volatility of the real estate market varies greatly, using the transaction data compiled from Seoul, the capital of South Korea, and its surrounding region, Gyeonggi. The study results show almost five times lower estimation errors when predicting housing transaction prices using the PSCM compared to the HPM in both scenarios and in both areas. The proposed method is particularly useful for mass valuation of apartments or densely located housing units.

Valuing urban regeneration projects: The case of the Navigli, Milan

This paper discusses the challenges inherent in the valuation of the social benefits of urban regeneration projects. The transformation of cities involves public and private investments, whose returns should include calculation of social benefits. Since traditional financial methodologies do not allow to capture the large and complex set of benefits, typically accruing to citizens in terms of quality of life, the application of non-market valuation methods such as Contingent Valuation (CV) and Hedonic Pricing (HP) offers an innovative opportunity. Here we analyse inhabitants' and city users' responses to the regeneration project of the Navigli canal network in Milan to understand how urban communities value such transformations. The Municipality of Milan proposed the project to restore the canal network in 2018 to enhance recreational amenities, improve environmental quality, and reduce negative externalities. While the political benefit from restoring the canals is clear, public and private benefits from the scheme need to be assessed to ensure the scheme's long-term sustainability. This paper presents an assessment (CV) of the socio-economic benefits associated to the reopening of the first section of the Navigli canal network, based on analysis of the views of 583 residents and city users, and compares these results with those of a HP method application developed by Boscacci et al. (2017). The paper explores whether the joint use of CV and HP could overcome their mutual weaknesses, providing a coherent methodology for assessing efficiency and effectiveness of policies and projects. • Valuation of the social benefits of the Navigli urban regeneration project in Milan (Italy). • Comparative analysis of non-market valuation methods such as Contingent Valuation (CV) and Hedonic Pricing (HP). • Application of the CV and HP to assess the social benefits of the Navigli project in support of decision making. • Joint use of CV and HP could overcome their mutual weaknesses. • Providing a coherent methodology for assessing both efficiency and effectiveness of policies and projects.

Geospatial Heterogeneity in Monetary Value of Proximity to Waterfront Ecosystem Services in the Gulf of Mexico

Open spaces, including waterfront areas, are critical to coastal communities and provide many benefits, including recreation opportunities, economic development, ecological benefits, and other ecosystem services. However, it is not clear how values of waterfront ecosystem services vary across geographical areas which prevents development and adoption of site-specific natural resource conservation plans and suitable long-term land management strategies. This study estimated the monetary value of distance to different waterfront types in coastal counties of Mississippi and Alabama (U.S.) using a geographically weighted regression (GWR) approach as an extension to a traditional hedonic pricing method (HPM). In addition, the study utilized publicly available data from the U.S. Census Bureau instead of certified rolls of county property assessors and Multiple Listing Service (MLS) data which can be costly and difficult to obtain. Residents valued most waterfront types which was reflected in greater assessed prices for houses in proximity to these waterfronts. However, the value of ecosystem services associated with waterfronts differed geospatially. The marginal implicit prices ranged from −$6343 to $6773 per km depending on a waterfront type. These estimates will be useful to city developers, land-use planners, and other stakeholders to make more informed and balanced decisions related to natural resource preservation associated with coastal areas, land-use planning, and zoning. In addition, information from this study can be used in developing healthy living environments where local economy can benefit from increased property tax revenues associated with waterfronts and their ecosystem services.

Konut Fiyatlarına Etkisi ve Kullanıcı Algıları Doğrultusunda Kentsel Çevre Kalitesinin Sarıçay ve Mevcut Peyzaj Donatıları Kapsamında Değerlendirilmesi: Çanakkale Örneği

This study focused on the economic value of housing and environmental attributes with variability according to demand, for the neighborhood adjoining the Sarıçay River in the Çanakkale urban area. Accordingly, an increasing trend emerged for housing prices linked to environmental attributes and attention was drawn to this share which may be used for sustainable development of the region. A survey based on the hedonic pricing method determined the value of the Sarıçay river, strait view, location and landscape qualities. With the sameapproach, a survey based on conditional valuation using a model landscape design created with the “Realtime Landscaping Architect 20” program was used to provide an assessment based on the willingness of 400 residents of the region. From the close results obtained with the two methods, the contribution of environmental attributes to housing prices was found to be 88,229 TL. From here, based on sales of 200 houses in the region, nearly 17,564,800 TL social benefit can be mentioned. Additionally, integration and rational management of this benefitby local administrations will make it possible to provide sustainable ideal environmental development (care and maintenance) for the regional public and living areas.

Farmland value in the “Conegliano Valdobbiadene Prosecco Superiore PGDO” area. An application of the Hedonic Pricing method.

In the last 30 years, numerous studies analysed the factors that affect land prices mainly using the Hedonic Pricing method. These studies have shown that many factors can affect land prices (e.g. land and surrounding territory characteristics, accessibility, proximity to urban area, etc.). However, they rarely addressed the analysis of the reliability of the models by comparing the estimated values to the observed one. Attempting to face this problem, our study analysed the land market of the “Conegliano Valdobbiadene Prosecco Superiore PGDO” area. Despite the quite high coefficient of determination (r2 = 0.76) and statistical significance of the model parameters, we found that the percentage absolute deviation between observed and estimated value is higher than 30% in 34% of cases. Our results seem to suggest that future researches should devote particular attention to the analysis of the discrepancies existing between estimated values and market prices in order to support the appraisal activity of professional valuers.