Hedonic prices, capitalization rate and real estate appraisal

Gaetano Lisi

Economics Bulletin, 2015, vol. 35, issue 1, 783-787

Abstract: Studies on real estate economics neglected the relationship between hedonic prices and capitalization rate, thus considering the hedonic models and the income approach as two separate and alternative appraisal methods. In this short theoretical paper we show that integration is possible and relatively simple and the combined model allows to estimate the capitalization rate using only hedonic prices. Also, the developed model brings out a peculiarity of real estate asset, namely the negative relationship between economic life of the property and capitalization rate.

Keywords: Income approach; yield capitalization; direct capitalization; hedonic models; hedonic prices; capitalization rate; durable goods. (search for similar items in EconPapers)
JEL-codes: G0 G1 (search for similar items in EconPapers)
Date: 2015-03-29
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