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Modelling micro-location variables for hedonic house price models

Author

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  • Ronald S. Weberndorfer
  • Wolfgang A. Brunauer

Abstract

In this paper we model small-scale (micro) location variables using geographic information systems (GIS). These variables include information that is usually not available on a small scale from public sources, for example residential environment, noise, accessibility or elevation. The modeling of micro-location variables is mainly based on grid technology with a resolution accuracy of up to 30 meter covering the whole research area (Austria). We give several examples how to model spatial raster variables using the Python programming language. These variables are then used as explanatory covariates in hedonic house price models. We apply a generalized additive modeling (GAM) framework, where continuous covariate effects are modeled as polynomial splines and unexplained spatial heterogeneity (beyond what can be explained by location covariates) as random effects. We find that additional usage of high resolution micro-location variables improves the model quality signicantly. The results are displayed on overview maps for Austria as well as in detail for some selected regions, which allows inspecting the effects of the applied grid technology in more depth. The resulting models are used for automated valuation purposes for residential real estate in a large Austrian bank.

Suggested Citation

  • Ronald S. Weberndorfer & Wolfgang A. Brunauer, 2014. "Modelling micro-location variables for hedonic house price models," ERES eres2014_35, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2014_35
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    Citations

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    Cited by:

    1. Chang-Lin Mei & Feng Chen & Wen-Tao Wang & Peng-Cheng Yang & Si-Lian Shen, 2021. "Efficient estimation of heteroscedastic mixed geographically weighted regression models," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 66(1), pages 185-206, February.
    2. Hungria Gunnelin, Rosane, 2020. "Bidding strategies and winner’s curse in auctions of non-distressed residential real estate," Working Paper Series 20/13, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    3. Nam Bui & Le Wen & Basil Sharp, 2024. "House Prices and Flood Risk Exposure: An Integration of Hedonic Property Model and Spatial Econometric Analysis," The Journal of Real Estate Finance and Economics, Springer, vol. 69(1), pages 100-131, July.

    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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