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Hedonic Price Indexes for Housing

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  • Robert Hill

Abstract

Every house is different. It is important that house price indexes take account of these quality differences. Hedonic methods which express house prices as a function of a vector of characteristics (such as number of bedrooms and bathrooms, land area and location) are particularly useful for this purpose. In this report I consider some of the developments in the hedonic methodology, as it is applied in a housing context, that have occurred in the last three decades. A number of hedonic house price indexes are now available. However, it is often difficult to see how these indexes relate to each other. For this reason the paper attempts to impose some structure on the literature by developing a taxonomy of hedonic methods, and then show how existing methods fit into this taxonomy. Also discussed are some promising areas for future research in the hedonic field, particularly the use of geospatial data and nonparametric methods for better capturing the impact of location on house prices. The main criticisms of the hedonic approach are evaluated and compared with the repeat sales and stratified median methods. The overall conclusion is that the advantages of the hedonic approach outweigh its disadvantages. Chaque maison est différente. Il est important que les indices de prix de l’ immobilier tiennent compte de ces différences de qualité. Les méthodes hédoniques qui expriment des prix de l'immobilier en fonction d'un vecteur de caractéristiques (telles que le nombre de chambres et salles de bains, superficie et l'emplacement) sont particulièrement utiles à cette fin. Dans le présent rapport je considère certains développements dans la méthode hédonique, telle qu'elle est appliquée dans un contexte de logement, qui se sont produits au cours des trois dernières décennies. Un certain nombre d'indices des prix hédoniques pour l’immobilier est maintenant disponible. Cependant, il est souvent difficile de voir comment ces indices sont liés les uns aux autres. C’est pour cette raison que ce papier tente d'imposer une structure sur la littérature en développant une taxonomie des méthodes hédoniques et montre alors comment les méthodes existantes s'insèrent dans cette taxonomie. Sont aussi discutées certains domaines prometteurs pour les futures recherches dans le domaine hédonique, notamment l'utilisation des données géo-spatiales et de méthodes non paramétriques pour mieux capter l'impact de l'emplacement sur le prix de l'immobilier. Certains des principaux critiques de l'approche hédonique sont évalués et comparés avec les ventes répétées et des méthodes stratifiées médians sont aussi discutées. Dans l'ensemble, on conclut que les avantages de l'approche hédonique l'emportent sur ses inconvénients.

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Paper provided by OECD Publishing in its series OECD Statistics Working Papers with number 2011/1.

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Date of creation: 04 Feb 2011
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Handle: RePEc:oec:stdaaa:2011/1-en

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Cited by:
  1. Philippe Bracke, 2013. "House Prices and Rents: Micro Evidence from a Matched Dataset in Central London," SERC Discussion Papers, Spatial Economics Research Centre, LSE 0127, Spatial Economics Research Centre, LSE.
  2. Jessica Castaño & Mariana Laverde & Miguel Ángel Morales Mosquera, . "Índice de Precios de la Vivienda Nueva para Bogotá: Metodología de Precios Hedónicos," Temas de Estabilidad Financiera, Banco de la Republica de Colombia 078, Banco de la Republica de Colombia.
  3. Robert J. Hill & Iqbal A. Syed, 2012. "Hedonic Price-Rent Ratios, User Cost, and Departures from Equilibrium in the Housing Market," Graz Economics Papers, University of Graz, Department of Economics 2012-08, University of Graz, Department of Economics.
  4. Mick Silver, 2012. "Why House Price Indexes Differ," IMF Working Papers 12/125, International Monetary Fund.

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