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Hedonic Regressions and the Decomposition of a House Price Index into Land and Structure Components

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  • W. Erwin Diewert
  • Jan de Haan
  • Rens Hendriks

Abstract

The paper uses hedonic regression techniques in order to decompose the price of a house into land and structure components using readily available real estate sales data for a small Dutch city. To get sensible results, it was useful to estimate a nonlinear model on data that cover multiple time periods. It also proved necessary to incorporate exogenous information on the rate of growth of construction costs in the Netherlands in order to obtain meaningful constant quality indexes for the price of land and structures separately.

Suggested Citation

  • W. Erwin Diewert & Jan de Haan & Rens Hendriks, 2015. "Hedonic Regressions and the Decomposition of a House Price Index into Land and Structure Components," Econometric Reviews, Taylor & Francis Journals, vol. 34(1-2), pages 106-126, February.
  • Handle: RePEc:taf:emetrv:v:34:y:2015:i:1-2:p:106-126
    DOI: 10.1080/07474938.2014.944791
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    File URL: http://hdl.handle.net/10.1080/07474938.2014.944791
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    References listed on IDEAS

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    1. Diewert, Erwin, 2007. "The Paris OECD-IMF Workshop on Real Estate Price Indexes: Conclusions and Future Directions," Economics working papers diewert-07-01-03-08-12-12, Vancouver School of Economics, revised 31 Jan 2007.
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    More about this item

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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