Specifying the effect of location in multivariate valuation models for residential properties

Abstract

Purpose -The purpose of this research is to explore from a mass appraisal perspective how the effects of location are reflected within valuation models. The paper sets out to detail the various techniques and the efficacy of their application. Design/methodology/approach -The approach adopted is analytical and based upon the development of locational attributes. An extensive literature base is synthesized with methods being evaluated in their application to mass appraisal. Findings -This research has identified that the three main groups interested in residential property valuation, namely, academia, industry and commerce have to a certain extent been unfamiliar with the research developments occurring in the other groups. The impact of this is important, given the need for integration and collaboration in terms of future model development.Research limitations/implications -The research underpinning this paper will provide a solid basis for further research into this area. The importance of measuring the effect that location has on value is of major significance in the determination of objective estimates of property value. Practical implications -Those within the assessment community could be described as pragmatists working in a situation that requires feasible and suitable solutions to the problem of measuring location value. It is our contention that the third generation techniques of spatially varying parameter models and spatial autocorrelation models will require greater industry verification before their use becomes more widely accepted. Originality/value -This paper provides a detailed analysis of methodologies used to reflect the value of location over the last 50 years. The debate is taken forward by describing what will be the contribution to the development of the next generation of location-specific modeling techniques.

The modifiable areal unit problem in hedonic house-price models

“…Locational characteristics are operationally defined as measures of accessibility to local amenities (e.g., distance to urban employment centers, the CBD, subway stations, and shopping centers). McCluskey and Borst (2007) provided a critical review of the locational effect on evaluating 2 G. Lee et al residential properties from a mass appraisal perspective. Can (1992) and Helbich, Brunauer, Vaz, and Nijkamp (2014) estimated urban housing prices by including structural and neighborhood characteristics in their models, whereas Cohen and Coughlin (2008) incorporated structural and locational attributes into their housing price function.…”

Mass Appraisal Models of Real Estate in the 21st Century: A Systematic Literature Review

“…Many scholars have paid attention to the GIS features of properties and considered their impacts on appraisal [44,[78][79][80][81][82][83][84][85][86]. Meanwhile, some scholars such as Bourassa et al (2007) [87], McCluskey and Borst (2007) [88] have made improvements in the classification and compilation of GIS-based model.…”

Road distance and travel time for an improved house price Kriging predictor

“…Most contemporary machine-learning-based AVMs are hedonic in nature (a function of multiple attributes) (Nelson 1999;McClusky and Borst 2007). Examples of such attributes relating to residential property pricing include topography and natural geography (Kok, Monkkonen, and Quigley 2011), building footprint (Pace et al 1998), school proximity (Machin and Gibbons 2003), over head pylons (Bond, Sims, and Dent 2013) and crime (Thaler 1978).…”