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SPATIAL HETEROGENEITY ACROSS SUBMARKETS: Housing submarket in an urban area of Portugal

  • Joao Lourenço Marques
  • Eduardo Castro
  • Arnab Bhattacharjee
  • Paulo Batista

Spatial homogeneity is a strong assumption in the hedonic housing price context; if not analyzed conveniently it can be a potential source of specification errors. Spatial heterogeneity occurs when a territorial segmentation exists in the housing market and, therefore, either the hedonic prices associated with different attributes or the characteristics of the houses are not constant over space. The evidence of recognition of housing submarkets and the argument that caution should be exercised when interpreting the results of standard hedonic models has been identified early in the literature. Despite the argument that housing submarkets should be adopted as a working framework, some ambiguity remains about how to deal with this issue. The early empirical works on submarkets tended to be segmented into two major perspectives: those studies that adopt a supply side determinant focusing on the structural characteristics of dwellings and on neighbourhood characteristics; and those that focus on demand side determinants, such as, on household incomes or other demographic and socioeconomic characteristics. In this case the existence of distinct subgroups of demand is reflected on the territorial segmentation of the hedonic price vector. Thus, the objective of this communication is to a methodology to define housing submarkets applied at an urban area, specifically, the analysis will be applied to the urban area of Aveiro-Ãlhavo in Portugal. Demand and supply side views will be adopted and results compared to see how demand and supply interact to shape the segmentation landscape of housing markets

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa12p1111.

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Date of creation: Oct 2012
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Handle: RePEc:wiw:wiwrsa:ersa12p1111
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  1. Goodman, Allen C. & Thibodeau, Thomas G., 1998. "Housing Market Segmentation," Journal of Housing Economics, Elsevier, vol. 7(2), pages 121-143, June.
  2. Arnab Bhattacharjee & Sean Holly, 2010. "Structural Interactions in Spatial Panels," CDMA Working Paper Series 201003, Centre for Dynamic Macroeconomic Analysis.
  3. Bourassa, Steven C. & Cantoni, Eva & Hoesli, Martin, 2008. "Predicting House Prices With Spatial Dependence: Impacts Of Alternative Submarket Definitions," ERES eres2008_111, European Real Estate Society (ERES).
  4. Bourassa, Steven C. & Hamelink, Foort & Hoesli, Martin & MacGregor, Bryan D., 1999. "Defining Housing Submarkets," Journal of Housing Economics, Elsevier, vol. 8(2), pages 160-183, June.
  5. Goodman, Allen C. & Thibodeau, Thomas G., 2003. "Housing market segmentation and hedonic prediction accuracy," Journal of Housing Economics, Elsevier, vol. 12(3), pages 181-201, September.
  6. Allen C. Goodman & Thomas G. Thibodeau, 2007. "The Spatial Proximity of Metropolitan Area Housing Submarkets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 35(2), pages 209-232, 06.
  7. Arnab Bhattacharjee & Eduardo Castro & Jo�o Marques, 2012. "Spatial Interactions in Hedonic Pricing Models: The Urban Housing Market of Aveiro, Portugal," Spatial Economic Analysis, Taylor & Francis Journals, vol. 7(1), pages 133-167, March.
  8. Harsman Bjorn & Quigley John M., 1995. "The Spatial Segregation of Ethnic and Demographic Groups: Comparative Evidence from Stockholm and San Francisco," Journal of Urban Economics, Elsevier, vol. 37(1), pages 1-16, January.
  9. Brasington, David M. & Hite, Diane, 2005. "Demand for environmental quality: a spatial hedonic analysis," Regional Science and Urban Economics, Elsevier, vol. 35(1), pages 57-82, January.
  10. Schnare, Ann B. & Struyk, Raymond J., 1976. "Segmentation in urban housing markets," Journal of Urban Economics, Elsevier, vol. 3(2), pages 146-166, April.
  11. Clapp, John M. & Wang, Yazhen, 2006. "Defining neighborhood boundaries: Are census tracts obsolete?," Journal of Urban Economics, Elsevier, vol. 59(2), pages 259-284, March.
  12. Arnab Bhattacharjee & Sean Holly, 2010. "Understanding Interactions in Social Networks and Committees," CDMA Working Paper Series 201004, Centre for Dynamic Macroeconomic Analysis.
  13. Arnab Bhattacharjee & Chris Jensen-Butler, 2005. "Estimation of Spatial Weights Matrix in a Spatial Error Model, with an Application to Diffusion in Housing Demand," CRIEFF Discussion Papers 0519, Centre for Research into Industry, Enterprise, Finance and the Firm.
  14. Michaels, R. Gregory & Smith, V. Kerry, 1990. "Market segmentation and valuing amenities with hedonic models: The case of hazardous waste sites," Journal of Urban Economics, Elsevier, vol. 28(2), pages 223-242, September.
  15. Schnare, Ann B., 1980. "Trends in residential segregation by race: 1960-1970," Journal of Urban Economics, Elsevier, vol. 7(3), pages 293-301, May.
  16. Goodman, Allen C., 1998. "Andrew Court and the Invention of Hedonic Price Analysis," Journal of Urban Economics, Elsevier, vol. 44(2), pages 291-298, September.
  17. Kiel, Katherine A. & Zabel, Jeffrey E., 1996. "House Price Differentials in U.S. Cities: Household and Neighborhood Racial Effects," Journal of Housing Economics, Elsevier, vol. 5(2), pages 143-165, June.
  18. Linneman, Peter, 1981. "The demand for residence site characteristics," Journal of Urban Economics, Elsevier, vol. 9(2), pages 129-148, March.
  19. Straszheim, Mahlon R, 1974. "Hedonic Estimation of Housing Market Prices: A Further Comment," The Review of Economics and Statistics, MIT Press, vol. 56(3), pages 404-06, August.
  20. Galster, George C., 1987. "Residential segregation and interracial economic disparities: A simultaneous-equations approach," Journal of Urban Economics, Elsevier, vol. 21(1), pages 22-44, January.
  21. Steven Bourassa & Eva Cantoni & Martin Hoesli, 2007. "Spatial Dependence, Housing Submarkets, and House Price Prediction," The Journal of Real Estate Finance and Economics, Springer, vol. 35(2), pages 143-160, August.
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