A housing price index with the improvement-value adjusted repeated sales (IVARS) method

2023

Tourism Economics

Self Cite

Many tourism studies leverage the hedonic price model to gauge tourists’ willingness to pay for diverse attributes of short-term rental properties. However, when this estimation is applied to the temporal analysis, it can be biased if variables varying with time, such as term structure effects in short-term rentals, are omitted. This paper introduces a repeat sales Airbnb ADR (average daily rate) index to track the change in quality-adjusted rentals of Airbnb properties over time in Auckland, New Zealand, while factoring in the term structure. The findings confirm that using repeat sales data from Airbnb listings can significantly mitigate the bias linked to time-varying attributes. Results demonstrate that when the term structure is not considered, the ADR calculated by the hedonic method may be overestimated by 0.2% per day of the tenancy term. The inventive Airbnb ADR repeat sales index enables the assessment of Airbnb rental trends, taking into account changes in the term structure of leases. This new index can potentially enhance Airbnb listings by incorporating the effects of lease term structures.

Section: Discussionmentioning

confidence: 99%

Airbnb pricing and term structure: A temporal analysis of omitted variable bias and repeat sales method as remedies

2023

Tourism Economics

Self Cite

“…To examine the lead-lag relationship between capital value and transaction prices in both primary and secondary housing markets, three house price indices are constructed by the hedonic price model, viz., (a) Index of Transaction House Prices in the Primary Market, (b) Index of Capital Values, and (c) Index of Transaction House Prices in the Secondary Market. Equation (1) shows the semi-log hedonic price model with monthly dummies for constructing the price index (Yiu and Cheung 2021). One advantage of using a semi-log form model is its ease of interpretation, i.e., the percentage change in prices with respect to a unit of change in property attributes.…”

Section: The Test For Hypothesis 1 (Anchoring Effects) Lead-lag Relat...mentioning

confidence: 99%

Homebuyer Purchase Decisions: Are They Anchoring to Appraisal Values or Market Prices?

Yiu

Guan

2022

JRFM

Price discovery is an important research topic in real estate due to the heterogeneous nature of housing attributes and relatively thin trading activities compared to other assets. In Commonwealth countries, including New Zealand, governments usually conduct periodic appraisals for the purpose of collecting rates and levies. Such official appraisal values of properties, also known as capital values (CVs), are considered a price anchor for market participants in their negotiation processes. Real estate agents often use these appraisal values to advertise their listings and negotiate transaction prices. In this study, we aim to make an initial attempt to study the influence of CV on market prices using Granger causality tests and a hedonic pricing model. To test the lead-lag relationships, three million housing transactions from 1990 to 2020 in New Zealand are used to construct the capital values (CVs) and transacted prices (TPs) indices in both primary and secondary housing markets. The Granger causality test suggests that the indices of TPs and CVs have a bi-directional lead-lag relationship in the secondary housing market, whereas the relationship does not follow in the primary market where the information on CVs is unavailable. The results imply the existence of a CV anchoring effect. Such anchoring effects are also contingent on the timeliness of price anchors, which is consistent with the availability heuristic from behavioural economics.

“…To empirically probe these theories, we utilise the building consent dataset from BCI New Zealand PTY Limited (BCI NZ) to construct a construction (tendering) price index for Auckland using the hedonic pricing model. Furthermore, we leverage residential property transaction data from CoreLogic to construct a housing price index for Auckland using the repeat-sales method [14]. Our research design incorporates Granger-causality tests to inspect the shortterm relationship between the construction (tendering) price index and the housing price index.…”

Section: Introductionmentioning

confidence: 99%

The Costs of Construction and Housing Prices: A Full-Cost Pricing or Tendering Theory?

Guan

2023

Buildings

While construction costs and housing prices are implicitly examined in the construction economics literature, dedicated studies on their theoretical underpinning are rare. In this study, we investigated the application of different pricing theories in Auckland by testing the relationship between house prices and construction costs in Auckland from 1995 to 2021. The results contrast the tendering pricing theory, which posits that construction prices are optimal mark-ups unaffected by market demand, with the full-cost pricing theory, which acknowledges the market-dependent nature of pricing. By using the Toda-Yamamoto’s granger-causality test and Pesaran’s Autoregressive Distributive Lag (ARDL) bound tests, we analysed the relationship between the house price index (HPI) and construction cost index (CCI). The result suggests a significant relationship between housing prices and construction costs in both the short and long term, supporting the predominance of the full-cost pricing theory in Auckland’s housing market. The finding highlights the potential need for property industry participants to evaluate the market structure of the construction industry, fostering a more competitive environment and paving the way for more effective supply-related housing policies.