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

  • Sam K. Hui

    ()

    (Stern School of Business of New York University)

  • Alvin Cheung

    (Massachusetts Institute of Technology)

  • Jimmy Pang

    (Stanford University)

Registered author(s):

    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.

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    Article provided by Asian Real Estate Society in its journal International Real Estate Review.

    Volume (Year): 13 (2010)
    Issue (Month): 1 ()
    Pages: 1-29

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    Handle: RePEc:ire:issued:v:13:n:01:2010:p:1-29
    Contact details of provider: Postal: Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
    Web page: http://www.asres.org/

    Order Information: Postal: Asian Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
    Web: http://www.asres.org/ Email:


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    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. 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, 09.
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