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Comparing House Prices Across Regions and Time: An Hedonic Approach


  • Robert J. Hill

    () (School of Economics, The University of New South Wales)

  • Daniel Melser

    () (Moody’s Economy.Com)


Panel hedonic comparisons can be made using the region-time-dummy method. This method is a natural extension of the well known time-dummy and region-dummy methods which have been used extensively in the hedonic literature. We show that these methods are all affected by substitution bias, which can seriously distort their results. We propose an alternative approach that is free of substitution bias which builds up panel comparisons from bilateral building blocks using the hedonic imputation method. This approach is very flexible. We consider a number of variants on this method, all of which are likely to be improvements on the unconstrained region-time-dummy method. We illustrate our findings using data for 14 regions in Sydney over a six year period. We find clear evidence of bias in the region-time-dummy results as well as in simple average measures such as the median that fail to adjust for quality change. For these reasons we favor the hedonic imputations approach.

Suggested Citation

  • Robert J. Hill & Daniel Melser, 2007. "Comparing House Prices Across Regions and Time: An Hedonic Approach," Discussion Papers 2007-33, School of Economics, The University of New South Wales.
  • Handle: RePEc:swe:wpaper:2007-33

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    References listed on IDEAS

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    Cited by:

    1. Iqbal Syed & Daniel Melser, 2008. "Prices over the Product Life Cycle: An Empirical Analysis," Discussion Papers 2008-25, School of Economics, The University of New South Wales.
    2. Melser, Daniel & Syed, Iqbal, 2007. "Life Cycle Pricing and the Measurement of Inflation," MPRA Paper 16722, University Library of Munich, Germany, revised 07 Jul 2008.

    More about this item


    Hedonic regression; Quality adjustment; Housing; Price index; Substitution bias; Multilateral indexes;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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