IDEAS home Printed from https://ideas.repec.org/a/ire/issued/v13n012010p1-29.html
   My bibliography  Save this article

A Hierarchical Bayesian Approach for Residential Property Valuation:Application to Hong Kong Housing Market

Author

Listed:
  • Sam K. Hui

    (Stern School of Business of New York University)

  • Alvin Cheung

    (Massachusetts Institute of Technology)

  • Jimmy Pang

    (Stanford University)

Abstract

We have developed a statistical method for the valuation of residential properties using a hierarchical Bayesian approach, which takes into consideration the unique structure of the Hong Kong property market. Our model is calibrated on a dataset that covers all residential real estate transactions in ten major Hong Kong residential complexes from February 2008 to February 2009. Although parsimonious, our model outperforms other valuation methods that are based on average price-per-square- feet or expert assessments. By providing our model-based valuations online without charge, we hope to improve transparency in the Hong Kong housing market, thus enabling consumers to make better investment decisions.

Suggested Citation

  • Sam K. Hui & Alvin Cheung & Jimmy Pang, 2010. "A Hierarchical Bayesian Approach for Residential Property Valuation:Application to Hong Kong Housing Market," International Real Estate Review, Global Social Science Institute, vol. 13(1), pages 1-29.
    • Handle: RePEc:ire:issued:v:13:n:01:2010:p:1-29
    as

    Download full text from publisher

    File URL: https://www.gssinst.org/irer/wp-content/uploads/2020/10/vol-13-no-1-a-hierarchical-bayesian-approach-for-residential-property-valuation.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Tsong‐Yue Lai & Ko Wang, 1996. "Comparing the Accuracy of the Minimum‐Variance Grid Method to Multiple Regression in Appraised Value Estimates," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 24(4), pages 531-549, December.
    2. Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 893-920, October.
    3. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-137, March.
    4. 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 668-675, November.
    5. Clapham, Eric & Englund, Peter & Quigley, John M. & Redfearn, Christian L., 2007. "Revisiting the Past and Settling the Score: Index Revision for House Price Derivatives," Berkeley Program on Housing and Urban Policy, Working Paper Series qt1m2340dt, Berkeley Program on Housing and Urban Policy.
    6. 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..
    7. Tsong-Yue Lai & Kerry Vandell & Ko Wang & Gerd Welke, 2008. "Estimating Property Values by Replication: An Alternative to the Traditional Grid and Regression Methods," Journal of Real Estate Research, American Real Estate Society, vol. 30(4), pages 441-460.
    8. Eric Clapham & Peter Englund & John M. Quigley & Christian L. Redfearn, 2006. "Revisiting the Past and Settling the Score: Index Revision for House Price Derivatives," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 34(2), pages 275-302, June.
    9. Helen X.H. Bao & Alan T.K. Wan, 2004. "On the Use of Spline Smoothing in Estimating Hedonic Housing Price Models: Empirical Evidence Using Hong Kong Data," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 32(3), pages 487-507, September.
    10. George H. Lentz & Ko Wang, 1998. "Residential Appraisal and the Lending Process: A Survey of Issues," Journal of Real Estate Research, American Real Estate Society, vol. 15(1), pages 11-40.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Simon K.C. Cheung, 2017. "A Localized Model for Residential Property Valuation: Nearest Neighbor with Attribute Differences," International Real Estate Review, Global Social Science Institute, vol. 20(2), pages 221-250.
    2. Anthony C Constantinou & Norman Fenton, 2017. "The future of the London Buy-To-Let property market: Simulation with temporal Bayesian Networks," PLOS ONE, Public Library of Science, vol. 12(6), pages 1-30, June.
    3. Yunxi Bai & Jusheng Song & Shanshan Wu & Wei Wang & Jacqueline T. Y. Lo & S. M. Lo, 2020. "Comparing the Impacts of Location Attributes on Residents’ Preferences and Residential Values in Compact Cities: A Case Study of Hong Kong," Sustainability, MDPI, vol. 12(12), pages 1-23, June.
    4. Daikun Wang & Victor Jing Li, 2019. "Mass Appraisal Models of Real Estate in the 21st Century: A Systematic Literature Review," Sustainability, MDPI, vol. 11(24), pages 1-14, December.
    5. Daikun Wang & Victor Jing Li & Huayi Yu, 2020. "Mass Appraisal Modeling of Real Estate in Urban Centers by Geographically and Temporally Weighted Regression: A Case Study of Beijing’s Core Area," Land, MDPI, vol. 9(5), pages 1-18, May.
    6. Volkan Sevinç, 2022. "Determining the Flat Sales Prices by Flat Characteristics Using Bayesian Network Models," Computational Economics, Springer;Society for Computational Economics, vol. 59(2), pages 549-577, February.
    7. Ying-Hui Chiang & Yuan Ku & Feng Liu & Chin-Oh Chang, 2019. "House Price Dispersion in Taipei Residential Communities," International Real Estate Review, Global Social Science Institute, vol. 22(1), pages 109-129.
    8. Tommy Wu & Michael Cheng & Ken Wong, 2017. "Bayesian analysis of Hong Kong's housing price dynamics," Pacific Economic Review, Wiley Blackwell, vol. 22(3), pages 312-331, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michel Baroni & Fabrice Barthélémy & Mahdi Mokrane, 2011. "A repeat sales index robust to small datasets," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 29(1), pages 35-48, February.
    2. Arnaud Simon, 2009. "Quantifying the reversibility phenomenon for the repeat-sales index," Journal of Real Estate Research, American Real Estate Society, vol. 31(1), pages 27-62.
    3. Song Shi & Martin Young & Bob Hargreaves, 2010. "House Price-Volume Dynamics: Evidence from 12 Cities in New Zealand," Journal of Real Estate Research, American Real Estate Society, vol. 32(1), pages 75-100.
    4. Walsh, Patrick & Griffiths, Charles & Guignet, Dennis & Klemick, Heather, 2017. "Modeling the Property Price Impact of Water Quality in 14 Chesapeake Bay Counties," Ecological Economics, Elsevier, vol. 135(C), pages 103-113.
    5. Hill, Robert J. & Melser, Daniel & Syed, Iqbal, 2009. "Measuring a boom and bust: The Sydney housing market 2001-2006," Journal of Housing Economics, Elsevier, vol. 18(3), pages 193-205, September.
    6. George H. Lentz & Ko Wang, 1998. "Residential Appraisal and the Lending Process: A Survey of Issues," Journal of Real Estate Research, American Real Estate Society, vol. 15(1), pages 11-40.
    7. Ghysels, Eric & Plazzi, Alberto & Valkanov, Rossen & Torous, Walter, 2013. "Forecasting Real Estate Prices," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 2, chapter 0, pages 509-580, Elsevier.
    8. Liang Peng, 2012. "Repeat Sales Regression on Heterogeneous Properties," The Journal of Real Estate Finance and Economics, Springer, vol. 45(3), pages 804-827, October.
    9. Wesley Nimon & John Beghin, 1999. "Are Eco-Labels Valuable? Evidence From the Apparel Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 801-811.
    10. Michel Baroni & Fabrice Barthélémy & Mahdi Mokrane, 2008. "Is It Possible to Construct Derivatives for the Paris Residential Market?," The Journal of Real Estate Finance and Economics, Springer, vol. 37(3), pages 233-264, October.
    11. Choumert, Johanna & Stage, Jesper & Uwera, Claudine, 2014. "Access to water as determinant of rental values: A housing hedonic analysis in Rwanda," Journal of Housing Economics, Elsevier, vol. 26(C), pages 48-54.
    12. Green, Richard & Hendershott, Patric H., 1996. "Age, housing demand, and real house prices," Regional Science and Urban Economics, Elsevier, vol. 26(5), pages 465-480, August.
    13. Nicolai V. Kuminoff & Jaren C. Pope, 2014. "Do “Capitalization Effects” For Public Goods Reveal The Public'S Willingness To Pay?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(4), pages 1227-1250, November.
    14. Lepinteur, Anthony & Waltl, Sofie R., 2020. "Tracking Owners' Sentiments: Subjective Home Values, Expectations and House Price Dynamics," Department of Economics Working Paper Series 299, WU Vienna University of Economics and Business.
    15. Evangelista, Rui & Ramalho, Esmeralda A. & Andrade e Silva, João, 2020. "On the use of hedonic regression models to measure the effect of energy efficiency on residential property transaction prices: Evidence for Portugal and selected data issues," Energy Economics, Elsevier, vol. 86(C).
    16. Smed, Sinne & Hansen, Lars Garn, 2018. "Consumer Valuation of Health Attributes in Food," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 43(2), May.
    17. Theodore M. Crone, 2006. "Capitalization of the quality of local public schools: what do home buyers value?," Working Papers 06-15, Federal Reserve Bank of Philadelphia.
    18. Ramírez Muñoz de Toro, Gonzalo R. & Uriarte, Juan I. & Delbianco, Fernando & Larrosa, Juan M.C., 2017. "Un modelo hedónico de precios en línea de automóviles usados en Argentina || A Hedonic Model of Online Prices of Used Cars in Argentina," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 24(1), pages 25-53, Diciembre.
    19. Hans R.A. Koster & Jan Rouwendal, 2012. "The Impact Of Mixed Land Use On Residential Property Values," Journal of Regional Science, Wiley Blackwell, vol. 52(5), pages 733-761, December.
    20. Zhang, Congwen & Boyle, Kevin J. & Kuminoff, Nicolai V., 2015. "Partial identification of amenity demand functions," Journal of Environmental Economics and Management, Elsevier, vol. 71(C), pages 180-197.

    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ire:issued:v:13:n:01:2010:p:1-29. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: IRER Graduate Assistant/Webmaster (email available below). General contact details of provider: https://www.gssinst.org/gssinst/index.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.