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Hedonic prices, capitalization rate and real estate appraisal

Author

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  • Gaetano Lisi

    (Department of Economics and Law, University of Cassino and Southern Lazio)

Abstract

Studies on real estate economics neglected the relationship between hedonic prices and capitalization rate, thus considering the hedonic models and the income approach as two separate and alternative appraisal methods. In this short theoretical paper we show that integration is possible and relatively simple and the combined model allows to estimate the capitalization rate using only hedonic prices. Also, the developed model brings out a peculiarity of real estate asset, namely the negative relationship between economic life of the property and capitalization rate.

Suggested Citation

  • Gaetano Lisi, 2015. "Hedonic prices, capitalization rate and real estate appraisal," Economics Bulletin, AccessEcon, vol. 35(1), pages 783-787.
    • Handle: RePEc:ebl:ecbull:eb-15-00193
    as

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    References listed on IDEAS

    as
    1. Linneman, Peter & Voith, Richard, 1991. "Housing price functions and ownership capitalization rates," Journal of Urban Economics, Elsevier, vol. 30(1), pages 100-111, July.
    2. Garner, Thesia I. & Short, Kathleen, 2009. "Accounting for owner-occupied dwelling services: Aggregates and distributions," Journal of Housing Economics, Elsevier, vol. 18(3), pages 233-248, September.
    3. Phillips, Robyn S., 1988. "Residential capitalization rates: Explaining intermetropolitan variation, 1974-1979," Journal of Urban Economics, Elsevier, vol. 23(3), pages 278-290, May.
    4. Ko Wang & Terry V. Grissom & Su Han Chan, 1990. "The Functional Relationships and Use of Going-In and Going-Out Capitalization Rates," Journal of Real Estate Research, American Real Estate Society, vol. 5(2), pages 231-246.
    5. Hamilton, Bruce W. & Schwab, Robert M., 1985. "Expected appreciation in urban housing markets," Journal of Urban Economics, Elsevier, vol. 18(1), pages 103-118, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Income approach; yield capitalization; direct capitalization; hedonic models; hedonic prices; capitalization rate; durable goods.;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G0 - Financial Economics - - General

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