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Estimating the Demand for Housing, Land, and Neighbourhood Characteristics


  • Cheshire, Paul
  • Sheppard, Stephen


This paper provides estimates of the structure of demand for individual housing and neighborhood characteristics and for land in two British cities. The authors estimate a hedonic price function, and from this obtain the implicit prices of house attributes. These prices are used to estimate a demand system for each city. These perform well, and enable them to calculate price and income elasticities for each of the nondichotomous characteristics and for land. To counteract criticisms of demand estimates derived within the hedonic framework a method is developed for selecting an appropriate set of instrumental variables. Estimates derived from this method, however, differ only slightly from those obtained using the conventional techniques. Several features of these estimates provide insights into the unusual characteristics of the British housing market, the effects of constraints imposed by land use planning, and the effects of changing income distribution on the structure of demand. Copyright 1998 by Blackwell Publishing Ltd

Suggested Citation

  • Cheshire, Paul & Sheppard, Stephen, 1998. "Estimating the Demand for Housing, Land, and Neighbourhood Characteristics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 60(3), pages 357-382, August.
  • Handle: RePEc:bla:obuest:v:60:y:1998:i:3:p:357-82

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