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Use of the Hedonic Method to Calculate an Index of Real Estate Prices in Croatia

Author

Listed:
  • Davor Kunovac

    (The Croatian National Bank, Croatia)

  • Enes Đozović

    (The Croatian National Bank, Croatia)

  • Gorana Lukinić

    (The Croatian National Bank, Croatia)

  • Andreja Pufnik

    (The Croatian National Bank, Croatia)

Abstract

Due to the significant impact that real estate prices may have on overall economic developments, it is necessary to create a reliable index for monitoring the movements of real estate prices. This paper presents the hedonic method, which enables the creation of a real estate price index that in addition to the price takes into account the characteristics of real estate and provides for the estimation of pure change in the price of residential real estate between two points in time. This paper also strives to answer several interesting questions such as: has the sharp increase of real estate prices resulted in the purchase of smaller dwellings, how has the growth of real estate prices affected real demand for housing loans and can databases containing the asking prices of real estate be used to create a reliable real estate price index? This paper also indicates the possibility of the estimated regression model being used in the creation of an expert system for assessment of real estate prices of known characteristics.

Suggested Citation

  • Davor Kunovac & Enes Đozović & Gorana Lukinić & Andreja Pufnik, 2008. "Use of the Hedonic Method to Calculate an Index of Real Estate Prices in Croatia," Working Papers 19, The Croatian National Bank, Croatia.
    • Handle: RePEc:hnb:wpaper:19
    as

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    File URL: http://www.hnb.hr/repec/hnb/wpaper/pdf/w-019.pdf
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    References listed on IDEAS

    as
    1. Dubravko Mihaljek, 2005. "Free movement of capital, the real estate market and tourism: a blessing or a curse for Croatia on its way to the European Union?," Chapters in books, in: Katarina Ott (ed.), Croatian Accession to the European Union: Facing the Challenges of Negotiations, volume 3, chapter 8, pages 185-228, Institute of Public Finance.
    2. Melser, Daniel, 2005. "The Hedonic Regression Time-Dummy Method and the Monotonicity Axioms," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 485-492, October.
    3. Olympia Bover & Pilar Velilla, 2001. "Hedonic house prices without characteristics: the case of new multiunit housing," Estudios Económicos, Banco de España, number 73.
    4. Jenny N. Lye & Joseph G. Hirschberg, 2002. "Tests of Inference for Dummy Variables in Regressions with Logarithmic Transformed Dependent Variables," Department of Economics - Working Papers Series 852, The University of Melbourne.
    5. David Rae & Paul van den Noord, 2006. "Ireland's Housing Boom: What has Driven it and Have Prices Overshot?," OECD Economics Department Working Papers 492, OECD Publishing.
    6. Brent R. Moulton, 2001. "The Expanding Role of Hedonic Methods in the Official Statistics of the United States," BEA Papers 0018, Bureau of Economic Analysis.
    7. Gouriéroux, Christian & Laferrère, Anne, 2009. "Managing hedonic housing price indexes: The French experience," Journal of Housing Economics, Elsevier, vol. 18(3), pages 206-213, September.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Adrienne Mack & Enrique Martínez García, 2011. "A cross-country quarterly database of real house prices: a methodological note," Globalization Institute Working Papers 99, Federal Reserve Bank of Dallas.
    2. Galinec Davor & Vuglar Jadranka & Cvrtila Dario, 2019. "Residential property price index in Croatia: from experimental to official statistics," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 5(1), pages 33-42, May.

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    More about this item

    Keywords

    hedonic index; real estate price index; real estate market;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • 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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