Residential Property Price Indexes: Spatial Coordinators versus Neighourhood Dummy Variables

Abstract

The paper addresses the following question: can satisfactory residential property price indexes be constructed using hedonic regression techniques where location effects are modeled using local neighbourhood dummy variables or is it necessary to use spatial coordinates to model location effects. Hill and Scholz (2018) addressed this question and found, using their hedonic regression model, that it was not necessary to use spatial coordinates to obtain satisfactory property price indexes for Sydney. However, their hedonic regression model did not estimate separate land and structure price indexes for residential properties. In order to construct national balance sheet estimates, it is necessary to have separate land and structure price indexes. The present paper addresses the Hill and Scholz question in the context of providing satisfactory residential land price indexes. The spatial coordinate model used in the present paper is a modification of Colwell’s (1998) spatial interpolation method. The modification can be viewed as a general nonparametric method for estimating a function of two variables.

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About the presenter's visit

Professor W. Erwin Diewert will be visiting the School of Economics from 21.10.19-25.10.19.  While here he will be using room 635 Colin Clark Building. If you would like to meet with him or have lunch or dinner with him please contact A/Prof Valentin Zelenyuk who will be his host while at The University of Queensland. A/Prof Zelenyuk can be contacted on v.zelenyuk@uq.edu.au.