CYCLE AND PERTINENCE OF THE PRICES TO THE SQUARE METER: THE CASE OF THE CITY OF BORDEAUX

Eric Le Fur and Benoit Faye

ERES from European Real Estate Society (ERES)

Abstract: In spite of some limits, the approach of the valorisation of the real estate market by the price to the square meter conserves the advantage of a short period of publication in comparison with the alternative methods (repeat sales method and hedonic method). Nevertheless, the hedonic studies show that the importance of the surface in the price is modified during the cycle. Our question is based on this report. Indeed, if the explanatory part of the surface in the determination of the price grows during the phase of expansion of the cycle, then the relevance of the price to the square meter could be rising with the increase of the prices. We propose in this article, a method of the appreciation of the relevance of the price to the square meter which allows the valuation of the real estate transactions. On the other hand, we observe the variations of this relevance during the cycle. We use a notarial database (120 000 transactions) on the residential real estate in Bordeaux between 1985 and 2005. We also use variables of localization intra urban and of surface of the exchanged real estate. These variables allow to test the relevance of the price to the square meter according to districts and types of property by surface. The results of the study show that according to the assumption retained (elasticity surface of price or elasticity surface of price to the square meter), the results are different. This conclusion remains valid for any type of surface and localization.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2008-01-01
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