Property valuation: the hedonic pricing model – location and housing submarkets

Abstract

Purpose

The purpose of this paper is to comment upon the use of hedonic pricing models for the valuation of property. This model can be particularly useful for some housing markets.

Design/methodology/approach

This Education Briefing is an explanation of the how hedonic pricing can be useful in looking at the effect of “location” on the house prices within different submarkets using the Italian real estate market as an example.

Findings

Although, this case study is relatively straightforward, it shows how the application of the market approach can provide insights in cases where the comparable properties belong to different submarkets with relatively few transactions.

Practical implications

In cases of mass appraisals, hedonic pricing models can provide a broad indication of value across submarkets.

Originality/value

This paper develops a general framework that connects multiple regression analysis, direct comparison model and submarket binary variables.

Citation

Lisi, G. (2019), "Property valuation: the hedonic pricing model – location and housing submarkets", Journal of Property Investment & Finance, Vol. 37 No. 6, pp. 589-596. https://doi.org/10.1108/JPIF-07-2019-0093