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Use of Hedonic Prices to Estimate Capitalization Rate

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  • Gaetano Lisi

    (University of Cassino and Southern Lazio)

Abstract

In this paper, a model of income capitalization is developed where hedonic prices play a key role in estimating the going-in capitalization rate. Precisely, the hedonic functions for rental and selling prices are introduced into a basic model of income capitalization. From the modified model, it is possible to derive a direct relationship between hedonic prices and capitalization rate. An advantage of the proposed approach is that estimation of the capitalization rate can be made without considering rental income data. Empirical evidence is provided for the theoretical result.

Suggested Citation

  • Gaetano Lisi, 2015. "Use of Hedonic Prices to Estimate Capitalization Rate," International Real Estate Review, Global Social Science Institute, vol. 18(3), pages 303-316.
    • Handle: RePEc:ire:issued:v:18:n:03:2015:p:303-316
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    References listed on IDEAS

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    More about this item

    Keywords

    Income Capitalization Approach; Hedonic Models; Hedonic Prices; Capitalization Rate;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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