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A Hybrid Approach to Real Estate Price Definition: A Case Study in Western Switzerland

Author

Listed:
  • Maurin Baillif
  • Matthieu de Lapparent
  • Evanthia Kazagli

Abstract

Accurate estimation of property prices is a key issue within a heterogeneous market where submarkets may exist without the identification criteria being known or measurable. We propose a discrete mixture of market hedonic-pricing model implementing a simulated expectation-maximization algorithm and an accuracy criterion to evaluate the differences between the latent class model and the classical hedonic pricing model. The methodology is applied to rent data from Western Switzerland, spatially augmented using only open source data. The results demonstrate that the use of the proposed approach improves the precision of rent determination. JEL codes: C51, C52, C53, D41, R31.

Suggested Citation

  • Maurin Baillif & Matthieu de Lapparent & Evanthia Kazagli, 2021. "A Hybrid Approach to Real Estate Price Definition: A Case Study in Western Switzerland," Revue économique, Presses de Sciences-Po, vol. 72(6), pages 1055-1077.
    • Handle: RePEc:cai:recosp:reco_726_1055
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    More about this item

    Keywords

    real estate; price definition; hedonic regression; latent class; simulated expectation-maximization algorithm (SEM);
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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