Comparing automated valuation models for real estate assessment in the Santiago Metropolitan Region: A study on machine learning algorithms and hedonic pricing with spatial adjustments

This study compares the precision and interpretability of two automated valuation models for evaluating the real estate market in the Santiago Metropolitan Region of Chile: machine learning algorithms, specifically LightGBM, and hedonic prices with spatial adjustments (SAR). Traditional residence attributes, such as housing amenities and proximity to services, were considered alongside visual information extracted from images using Convolutional Neural Networks (CNN). The research evaluates the influence of each model characteristic on performance metrics and identifies the relative importance of attributes using the SHapley Additive exPlanations (SHAP) algorithm. The results demonstrate the positive impact of image-based variables on performance metrics, showing that the introduction of visual information can considerably reduce error margins when estimating housing prices. In addition, the SHAP algorithm reveals complex non-linear interactions between price and crucial variables such as total surface area and neighborhood attributes, highlighting the importance of using methods that can capture these effects. Likewise, both LightGBM and SAR models indicate that variables that have the most significant impact on the value of properties are total surface area, municipality quality index, average academic level of nearby schools, and the number of bathrooms.