The incidence of characteristics in housing prices and offer prices

Traditionally the appraisal of house prices is conducted through hedonic approaches: the price is explained by structural and positional characteristics. Starting from these premises, we compare housing offer and transaction prices to discuss the role of the determinants of real estate house price in the two markets. For this purpose, we resort to a measure of association based on a proportional reduction in variation, proposed by Kendall and Stuart (1979): it represents the incidence of a characteristic X on the price variability. The goal of the above association measure is twofold: on one side the computational simplicity, on the other side it is that it has been defined for a pair of variable (X, Y) where the response variable Y is quantitative and the variable X is qualitative. This is the case when one consider a characteristic (X) involved in the price (Y) formation. We perform the above analysis on the Turin real estate market. We consider a sample of 516 dwellings. In particular we examine the following characteristics: presence of the elevator, typology, dwelling preservation status, building preservation status, Microzone (spatially homogeneous submarket, a positional characteristics). The data support the thesis that, as concerns the characteristics considered, the incidence is almost the same in the two markets. It is further remarkable that the characteristics whose incidence in price formation is higher are the typology and the Microzone: 52% and 63% respectively as concerns offer prices and 54% and 63% as concerns transaction prices, supporting the increasing role of spatial statistics in the real estate market.