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The Real Estate Cycle and the Distortion of Hedonic Price on the Residential Sector: the Case of the City of Bordeaux

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  • Benoit Faye
  • Eric Le Fur

Abstract

This paper investigates the links between cycle studies and hedonic approach that is to say the existence, the nature, and the scale of a possible distortion in the valuation of the attributes of housing during the cycle. Such a distortion is obviously a source of error in the decision-making of the investors vis-‡-vis the calculation of the returns and the risks of the real-estate sector. Two working hypotheses will thus be tested. On the one hand the real-estate cycle affects the weight of the attributes revealed by the hedonic approach in the calculation of the lump price of the housing. On the other hand, these distortions depend at the same moment on cyclical and hedonic factors. The choice of the city of Bordeaux as a field of study justified by the scale of the cycle between 1992 and 2005, and to the availability of information about the transactions (except new and public housing) in the data base of the DIA (notary registration). The chosen method is quantitative and uses OLS on values transformed to facilitate the comparison with the previous works.

Suggested Citation

  • Benoit Faye & Eric Le Fur, 2007. "The Real Estate Cycle and the Distortion of Hedonic Price on the Residential Sector: the Case of the City of Bordeaux," ERES eres2007_231, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2007_231
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    Cited by:

    1. Benoit Faye & Éric Le Fur, 2012. "Square, Plaza, Piazza, Place: What Do We Know about these Targets of Urban Regeneration Programmes?," Urban Studies, Urban Studies Journal Limited, vol. 49(14), pages 3081-3099, November.

    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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