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Rental Amenities and the Stability of Hedonic Prices: A Comparative Analysis of Five Market Segments

The current paper applies the hedonic approach to five rental submarkets in the Quebec region, namely Quebec City, Vanier, Ste-Foy, Beauport and Charlesbourg. The databank consists of information obtained from property owners via a yearly survey; some 32,000 rental units and nearly 3,300 buildings are included in the study. Data provide detailed information on building and apartment size, age, location, services provided, quality of premises and type of occupants; vacancy rates can also be derived from the bank. In addition, resorting to a regional geographic information system permits integration of neighborhood effects into the analysis. Findings suggest that significant differences in implicit prices do exist across market segments. However, while consistent results are obtained for major rent determinants, collinearity clearly emerges with respect to some rental attributes. Using a regression-based paired comparison approach, it is possible to identify stable hedonic prices for main rental services; the coefficients thus obtained are then forced back as constraints into the service-adjusted model, thereby improving its overall consistency and practicability.

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Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

Volume (Year): 12 (1996)
Issue (Month): 1 ()
Pages: 17-36

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Handle: RePEc:jre:issued:v:12:n:1:1996:p:17-36
Contact details of provider: Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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Order Information: Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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  1. Stephen Malpezzi & Larry Ozanne & Thomas G. Thibodeau, 1987. "Microeconomic Estimates of Housing Depreciation," Land Economics, University of Wisconsin Press, vol. 63(4), pages 372-385.
  2. G. Stacy Sirmans & John D. Benjamin, 1991. "Determinants of Market Rent," Journal of Real Estate Research, American Real Estate Society, vol. 6(3), pages 357-380.
  3. G. Donald Jud & James Frew, 1990. "Atypicality and the Natural Vacancy Rate Hypothesis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(3), pages 294-301.
  4. Smith, Lawrence B, 1974. "A Note on the Price Adjustment Mechanism for Rental Housing," American Economic Review, American Economic Association, vol. 64(3), pages 478-81, June.
  5. Karl L. Guntermann & Stefan Norrbin, 1987. "Explaining the Variability of Apartment Rents," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 15(4), pages 321-340.
  6. Rosen, Kenneth T & Smith, Lawrence B, 1983. "The Price-Adjustment Process for Rental Housing and the Natural Vacancy Rate," American Economic Review, American Economic Association, vol. 73(4), pages 779-86, September.
  7. 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..
  8. James R. Frew & G. Donald Jud, 1988. "The Vacancy Rate and Rent Levels in the Commercial Office Market," Journal of Real Estate Research, American Real Estate Society, vol. 3(1), pages 1-8.
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