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

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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 was useful to use a nonlinear regression model using data that covered multiple time periods. It also proved to be necessary to impose some restrictions on the price of structures. The resulting builder’s hedonic regression model was compared with the results for traditional logarithmic hedonic regression models.

Suggested Citation

  • de Haan, Jan & Diewert, Erwin & Hendriks, Rens, 2011. "Hedonic Regressions and the Decomposition of a House Price index into Land and Structure Components," Economics working papers erwin_diewert-2011-8, Vancouver School of Economics, revised 05 Apr 2011.
  • Handle: RePEc:ubc:bricol:erwin_diewert-2011-8
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    File URL: http://faculty.arts.ubc.ca/ediewert/dp1101.pdf
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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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    Keywords

    House price indexes; land and structure components; time dummy hedonic regressions; Fisher ideal indexes.;

    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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