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Expropriation risk and housing prices: Evidence from an emerging market

  • Contreras, Víctor
  • Garay, Urbi
  • Santos, Miguel Angel
  • Betancourt, Cosme
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    This paper examines the microeconomic determinants of residential real estate prices in Caracas, Venezuela, using a private database containing 17,526 transactions from 2008 to 2009. The particular institutional characteristics of many countries in Latin America, and Venezuela in particular, where land invasions and expropriations (with only partial compensation) have been common threats to property owners, provide us with an opportunity to test the effects of these risks on housing prices using a unique database. The effect of these risks on property prices is negative and significant. To our knowledge, this is the first attempt to quantify these impacts in the Hedonic pricing literature applied to real estate. Size, the number of parking spaces, the age of the property, the incidence of crime, and the average income in the neighborhood are significant determinants of prices. Finally, this paper analyzes the microeconomic determinants of housing prices at the municipal level.

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    Article provided by Elsevier in its journal Journal of Business Research.

    Volume (Year): 67 (2014)
    Issue (Month): 5 ()
    Pages: 935-942

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    Handle: RePEc:eee:jbrese:v:67:y:2014:i:5:p:935-942
    Contact details of provider: Web page: http://www.elsevier.com/locate/jbusres

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    1. Berna Keskin, 2008. "Hedonic analysis of price in the istanbul housing market," International Journal of Strategic Property Management, Taylor & Francis Journals, vol. 12(2), pages 125-138, March.
    2. Joachim Zietz & Emily Zietz & G. Sirmans, 2008. "Determinants of House Prices: A Quantile Regression Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 37(4), pages 317-333, November.
    3. Steve Gibbons, 2003. "The Costs of Urban Property Crime," CEP Discussion Papers dp0574, Centre for Economic Performance, LSE.
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    5. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
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    7. Allen Lynch & David Rasmussen, 2001. "Measuring the impact of crime on house prices," Applied Economics, Taylor & Francis Journals, vol. 33(15), pages 1981-1989.
    8. Thaler, Richard, 1978. "A note on the value of crime control: Evidence from the property market," Journal of Urban Economics, Elsevier, vol. 5(1), pages 137-145, January.
    9. Cropper, Maureen L & Deck, Leland B & McConnell, Kenneth E, 1988. "On the Choice of Functional Form for Hedonic Price Functions," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 668-75, November.
    10. Benson, Earl D, et al, 1998. "Pricing Residential Amenities: The Value of a View," The Journal of Real Estate Finance and Economics, Springer, vol. 16(1), pages 55-73, January.
    11. Eugenio Figueroa & George Lever, 1992. "Determinantes del precio de la vivienda en Santiago: Una estimación hedónica," Estudios de Economia, University of Chile, Department of Economics, vol. 19(1 Year 19), pages 67-84, June.
    12. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132.
    13. Pope, Devin G. & Pope, Jaren C., 2012. "Crime and property values: Evidence from the 1990s crime drop," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 177-188.
    14. Iain R Lake & Andrew A Lovett & Ian J Bateman & Brett H Day, 2000. "Improving land compensation procedures via GIS and hedonic pricing," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 18(6), pages 681-696, December.
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