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Are Hedonic Models Really Quality-Adjusted? The Role of Apartment Quality in Hedonic Models of Housing Rental Market

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  • Hebdzyński Michał

    (Department of Microeconomics, Poznan University of Economics and Business, Al. Niepodległości 10, 61-875 Poznań, Poland)

Abstract

In micro-level data concerning the housing market, the apartment quality may be signaled via textual statements or the attached descriptions/photos. It may be done using hard information related to the easier-to-measure structural characteristics or soft information related to the apartment condition and design - soft quality. This paper checks whether the choice of the approach to handling the issue of soft quality of apartments influences the properties of hedonic models and the course of hedonic rent indices. The study shows that hedonic models that account for soft quality have better statistical properties than those without soft-quality-related variables. Among them, the models that include the information on quality extracted from descriptions of apartments prove to be the best. Still, considerable differences in the indicated course of hedonic rent indices have not been detected. However, the paper concludes that utilizing information on apartments’ soft quality may be crucial to understanding the market adjustment process to economic shocks. It has been proven that the price reaction of the Poznań (Poland) rental market to the COVID-19 pandemic and the Russian aggression on Ukraine has been diversified in the quality-related market segments.

Suggested Citation

  • Hebdzyński Michał, 2024. "Are Hedonic Models Really Quality-Adjusted? The Role of Apartment Quality in Hedonic Models of Housing Rental Market," Real Estate Management and Valuation, Sciendo, vol. 32(2), pages 46-57.
    • Handle: RePEc:vrs:remava:v:32:y:2024:i:2:p:46-57:n:1004
    DOI: 10.2478/remav-2024-0014
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    References listed on IDEAS

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    1. José María Liberti & Mitchell A Petersen, 2019. "Information: Hard and Soft," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 8(1), pages 1-41.
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    More about this item

    Keywords

    rental market; quality; signaling; hedonic methods; price index;
    All these keywords.

    JEL classification:

    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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