Residential Property Price Indexes: Spatial Coordinates versus Neighbourhood Dummy Variables

Walter Diewert and Chihiro Shimizu

Microeconomics.ca working papers from Vancouver School of Economics

Abstract: The paper addresses the following question: can satisfactory residential property price indexes be constructed using hedonic regression techniques where location effects are modeled using local neighbourhood dummy variables or is it necessary to use spatial coordinates to model location effects. Hill and Scholz (2018) addressed this question and found, using their hedonic regression model, that it was not necessary to use spatial coordinates to obtain satisfactory property price indexes for Sydney. However, their hedonic regression model did not estimate separate land and structure price indexes for residential properties. In order to construct national balance sheet estimates, it is necessary to have separate land and structure price indexes. The present paper addresses the Hill and Scholz question in the context of providing satisfactory residential land price indexes. The spatial coordinate model used in the present paper is a modification of Colwell’s (1998) spatial interpolation method. The modification can be viewed as a general nonparametric method for estimating a function of two variables.

Keywords: Residential property price indexes; System of National Accounts; Balance Sheets; methods of depreciation (search for similar items in EconPapers)
JEL-codes: C14 C2 C21 C23 C25 C43 E31 R21 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2019-09-05, Revised 2020-01-10
New Economics Papers: this item is included in nep-acc, nep-mac and nep-ure
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https://econ2017.sites.olt.ubc.ca/files/2020/01/pd ... ISpatialCoordetc.pdf (application/pdf)

Related works:
Journal Article: Residential Property Price Indexes: Spatial Coordinates Versus Neighborhood Dummy Variables (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ubc:pmicro:erwin_diewert-2019-11

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