Modeling Submarket Effect for Real Estate Hedonic Valuation: A Probabilistic Approach

Determination of the parameters of automated valuation models for the hedonic property valuation of residential properties

International Journal of Housing Markets and Analysis ◽

10.1108/ijhma-02-2017-0018 ◽

2018 ◽

Vol 11 (1) ◽

pp. 73-100 ◽

Cited By ~ 3

Author(s):

Steffen Metzner ◽

Andreas Kindt

Keyword(s):

Performance Analysis ◽

Real Estate ◽

National Economy ◽

Content Type ◽

Property Valuation ◽

Hedonic Valuation ◽

Regression Parameters ◽

Wide Range ◽

Residential Properties ◽

The Individual

Purpose The development and testing of the hedonic methods for property valuation require statistical analysis and professional preparation of relevant databases. As a first step, the presumable relevant influencing variables (parameters) have to be determined. Previous studies have shown a large variety of parameters which overlap or deviate from each other. This study aims to collect, systematise and structure different parameters for the further development and testing of hedonic models. Design/methodology/approach The study comprises a detailed research and deeper analysis of previous studies regarding the hedonic valuation (mainly for residential properties). Flanking areas of examination serve, if they are appropriately suitable, as supplements (e.g. performance analysis and regression). Parameters are extracted from a wide range of literature, compared and integrated into an overall presentation of the results. Findings In total, 407 parameters were extracted from previous studies on hedonic valuation and performance analysis. Because of various definitions of some parameters in the literature, the current paper combined them in one meaning to avoid misunderstandings in further analysis. Higher-level (global) and lower-level (specific) parameters are contained/described in the final list. The result of this study identifies up to five levels of parameters (within the relevant hierarchy). Research limitations/implications The parameters have not yet been statistically tested. The relevance of individual parameters has to be tested with relevant corresponding databases and statistical methods (e.g. correlation and regression). Practical implications To manage larger real estate portfolios, there is a need for regular property valuations. From this perspective, there is a great interest related to the optimisation of the valuation costs, valuation quality and valuation duration. Hedonic methods are considered as an efficient way of performing these valuation tasks. However, further suitable models and parameters are needed. The study describes parameters that can be appropriate for the development of relevant models and creates a structured parameters list, providing the technical basis for the latter. This structured parameter list is substantiated by the evaluation of the existing research. Social implications Property values represent a significant asset for the national economy and for the individual wealth/welfare. The development of property value in a national economy is also relevant for politics, economy and society. The use of hedonic methods and the knowledge of important individual parameters can contribute towards assessing and substantiating the effect of political decisions on the value of real estate. Originality/value For the first time, a comprehensive and structured analysis on the value of the relevant parameters used in hedonic methods is performed. Thereby a large number of parameters were identified which question the stability of the results in respective individual studies. In addition, the newly developed hierarchy of parameters can serve as the basis for further research.

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Hedonic valuation of apartments in Kenya

Property Management ◽

10.1108/pm-04-2020-0022 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Raphael Mutisya Kieti ◽

Walter Ogolla

Keyword(s):

Real Estate ◽

Quantitative Methods ◽

Hedonic Pricing ◽

Hedonic Model ◽

Content Type ◽

Valuation Model ◽

Hedonic Valuation ◽

Real Estate Sector ◽

Study Results

PurposeThis paper applies the hedonic pricing model (HPM) approach to identify critical determinants of apartment value and employs the technique to develop a valuation model that can accurately estimate the value of apartments.Design/methodology/approachThe research employed a case study design that was limited to transaction sales and attribute data of apartments in Nyali estate, Mombasa County in Kenya. A sample of 120 sales of apartments obtained from registered real estate firms was analyzed using quantitative methods.FindingsAccording to the study results, the hedonic valuation model developed comprises four critical determinants of apartment value, namely, number of parking lots, presence of swimming pool, age of apartment and provision of balcony. The hedonic model was tested and found to be accurate and reliable in estimating apartment value.Research limitations/implicationsThe model will improve accuracy, reliability and efficiency in valuation. The application of the model in the valuation of apartments is, however, limited to the case study area where the data are obtained. The scope of application of the model may be improved by increasing the sample size to include apartment sales data from other estates in Mombasa County.Originality/valuePrevious studies that have used the HPM technique in analysis of apartment values have focused on the “explanatory” and “contributory” power of attributes on apartment values, rather than the development and use of the model to measure value. The present study is the first to develop a HPM equation for property value estimation in the apartment real estate sector in Kenya.

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Research of environmental risk factors in estimation of real estate

Automobile Roads and Road Construction ◽

10.33744/0365-8171-2021-110-099-107 ◽

2021 ◽

pp. 99-107

Author(s):

Liudmyla Bondarenko ◽

◽

Oksana Kushnirova ◽

Keyword(s):

Risk Factors ◽

Environmental Factors ◽

Real Estate ◽

Environmental Risk ◽

Quantitative Estimation ◽

Probabilistic Approach ◽

Physical Nature ◽

Environmental Risk Factors ◽

Cumulative Impact ◽

Harmful Substances

The paper investigates environmental risk factors that determine the value of real estate assets and make valuation decisions. It is determined that the components of the environment are the object of the cumulative impact of environmental risk, and indirectly through them are real estate objects and people. Among all the environmental components, the most decisive is the atmosphere, as the harmful substances coming from the atmospheric air into the human body are absorbed most intensely. The main criterion for environmental risk assessment is the degree of influence of harmful substances on the health of the population. The systematization of environmental risk factors, which provides an analysis of the causes, sources and significance of negative material and physical impact in the study area with the separation of two qualitatively different types of environmental risk: direct and indirect. Both positive and negative environmental factors that affect the value of real estate are listed. It is proposed to determine environmental risk as part of a probabilistic approach to assess the deterioration of life due to the deterministic and stochastic effects of environmental pollution surrounding a real estate object. Dependencies for quantitative estimation of direct and indirect environmental risks are determined. Conceptual bases for objective consideration of negative environmental factors of material and physical nature in the developed territories have been developed.

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