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

Diewert, W. Erwin; Haan, J. de; Hendriks, Rens

doi:10.1080/07474938.2014.944791

Cited by 85 publications

(107 citation statements)

References 28 publications

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“…But it is likely that a model that is similar to (1) applies to older structures as well. Older structures will be worth * 8 See Diewert, de Haan and Hendriks (2011) [7] (2015) [8] for evidence on this multicollinearity problem in the context of residential detached housing data using Dutch data. * 9 This index was constructed by the Construction Price Research Association which is now an independent agency but prior to 2012 was part of the Ministry of Land, Infrastructure, Transport and Tourism (MLIT), a ministry of the Government of Japan.…”

Section: The Basic Builder's Modelmentioning

confidence: 99%

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Hedonic regression models for Tokyo condominium sales

Diewert

Shimizu

2016

Regional Science and Urban Economics

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The paper fits a hedonic regression model to the sales of condominium units in Tokyo over the period 2000-2015. The problem is complicated by the need to decompose the selling price of a unit into a component that can be attributed to the structure area of the unit and another component that can be attributed to the unit's share of land value. There is very little information on the value of condominium land and so this paper develops a methodology for reducing this knowledge gap. The paper extends the builder's model which was developed in Eurostat (2013) [11]. Characteristics which prove to be important in explaining condominium prices are: the floor space area of the unit, the total land area of the building, the number of units in the building, the total number of stories in the building, the height of the sold unit, the age of the structure and the amount of excess land. The paper also derives an estimate for the annual geometric structure depreciation rate for condominiums in Tokyo.

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Section: The Basic Builder's Modelmentioning

confidence: 99%

“…This is another exogenous series that is required in order to implement our hedonic regression model. [7] (2015) [8] and Diewert and Shimizu (2015) [9] (2016) [10].…”

Section: The Basic Builder's Modelmentioning

confidence: 99%

Hedonic regression models for Tokyo condominium sales

Diewert

Shimizu

2016

Regional Science and Urban Economics

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“…When we do not have panel data, it is necessary to take into account additional characteristics of the structure as well as locational characteristics. Examples of the hedonic regression approach applied to sales of residential properties that lead to land and structure decompositions of property value can be found in Eurostat (2011), Diewert, de Haan and Hendriks (2011 and Diewert and Shimizu (2013). data intensive than hedonic methods.…”

Section: The Repeat Sales Methodsmentioning

confidence: 99%

“…There are two problems with the model defined by (27): 44 The material in this section is based on Diewert and Shimizu (2014). The builder's model has been applied to residential property sales by Eurostat (2011), Diewert, de Haan and Hendriks (2011 and Diewert and Shimizu (2013) except that straight line or piecewise linear depreciation was used as the depreciation model for the residential structures whereas in Diewert and Shimizu (2014), geometric depreciation models were used. Geometric depreciation models have the advantage that the implied structure asset values that the models generate always remain positive whereas piecewise linear depreciation models can generate negative asset values.…”

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confidence: 99%

Commercial Property Price Indexes and the System of National Accounts

Diewert

Fox²,

Shimizu

2014

SSRN Journal

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The paper studies the problems associated with the construction of price indexes for commercial properties that could be used in the System of National Accounts. Property price indexes are required for the stocks of commercial properties in the Balance Sheets of the country. Related service price indexes for the land and structure input components of a commercial property are required in the Production Accounts of the country if the Multifactor Productivity of the Commercial Property Industry is calculated as part of the System of National accounts. The paper reviews existing methods for constructing an overall Commercial Property Price Index (CPPI) and concludes that most methods are biased (due to their neglect of depreciation) and more importantly, not able to provide separate land and structure subindexes. A class of hedonic regression models that is not subject to these problems is discussed.JEL Classification: C2, C23, C43, D12, E31, R21.

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“…Second, even if the structure depreciates at a constant rate, the property's depreciation rate is likely to be time-varying because structure and land values do not move at the same pace. 5 The property would depreciate more (less) when construction costs increase (decrease) faster than land costs.…”

Section: An Age-adjusted Repeat Sales Modelmentioning

confidence: 99%

Separating the Age Effect from a Repeat Sales Index: Land and Structure Decomposition

Wong

Chau

Karato

et al. 2017

J Real Estate Finan Econ

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SummarySince real estate is heterogeneous and infrequently traded, the repeat sales model has become a popular method to estimate a real estate price index. However, the model fails to adjust for depreciation, as age and time between sales have an exact linear relationship. This paper proposes a new method to estimate an age-adjusted repeat sales index by decomposing property value into land and structure components. As depreciation is more relevant to the structure than land, the property's depreciation rate should depend on the relative size of land and structure. The larger the land component, the lower is the depreciation rate of the property. Based on housing transactions data from Hong Kong and Tokyo, we find that Hong Kong has a higher depreciation rate (assuming a fixed structure-to-property value ratio), while the resulting age adjustment is larger in Tokyo because its structure component has grown larger from the first to second sales.

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

Cited by 85 publications

References 28 publications

Hedonic regression models for Tokyo condominium sales

Hedonic regression models for Tokyo condominium sales

Commercial Property Price Indexes and the System of National Accounts

Separating the Age Effect from a Repeat Sales Index: Land and Structure Decomposition

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