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The Decomposition of a House Price index into Land and Structures Components: A Hedonic Regression Approach

Author

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  • de Haan, Jan
  • Diewert, Erwin
  • Hendriks, Rens

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 Dutch city. In order to get sensible results, it proved necessary to use a nonlinear regression model using data that covered multiple time periods. It also proved to be necessary to impose some monotonicity restrictions on the price of land and structures. The results of the additive model were compared with the results of a traditional logarithmic hedonic regression model.

Suggested Citation

  • de Haan, Jan & Diewert, Erwin & Hendriks, Rens, 2010. "The Decomposition of a House Price index into Land and Structures Components: A Hedonic Regression Approach," Economics working papers erwin_diewert-2010-1, Vancouver School of Economics, revised 13 Jul 2010.
  • Handle: RePEc:ubc:bricol:erwin_diewert-2010-1
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    File URL: http://faculty.arts.ubc.ca/ediewert/dp1001.pdf
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    Keywords

    Property price indexes; hedonic regressions; repeat sales method; rolling year indexes; Fisher ideal indexes.;
    All these keywords.

    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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