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Appraising residential property using hierarchical generalised additive models

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  • Dane Bax
  • Temesgen Zewotir
  • Delia North

Abstract

Log linear hedonic models are ubiquitous in econometric real estate research even though functional form assumptions are often not satisfied and the nested structure of homes in suburbs is not captured adequately. This study focuses on appraising different residential property types located throughout South Africa, investigating a flexible approach which does not assume some explicit functional form. The objective of this paper was to fit and compare two hierarchical generalised additive models to 412 500 property listings from 2013 to 2017. A gamma hierarchical model with random intercepts for the suburb provided the best fit and generalisability, while accounting for the spatial dependency in the data. The results show that hierarchical generalised additive models capture complex shapes between listing prices and structural property characteristics, and further reveal that partial pooling is useful to capture between suburb variability.

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  • Dane Bax & Temesgen Zewotir & Delia North, 2021. "Appraising residential property using hierarchical generalised additive models," Journal of Property Research, Taylor & Francis Journals, vol. 38(3), pages 198-212, July.
    • Handle: RePEc:taf:jpropr:v:38:y:2021:i:3:p:198-212
    DOI: 10.1080/09599916.2021.1888774
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    Cited by:

    1. Vijay Victor & Joshy Joseph Karakunnel & Swetha Loganathan & Daniel Francois Meyer, 2021. "From a Recession to the COVID-19 Pandemic: Inflation–Unemployment Comparison between the UK and India," Economies, MDPI, vol. 9(2), pages 1-19, May.

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