Hedonic, Residual, and Matching Methods for Residential Land Valuation

Steven Bourassa and Martin Hoesli
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Martin Hoesli: University of Geneva - Geneva School of Economics and Management (GSEM); Swiss Finance Institute; University of Aberdeen - Business School

No 22-55, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Accurate estimates of land values on a property-by-property basis are an important requirement for the effective implementation of land-based property taxes. We compare hedonic, residual, and matching techniques for mass appraisal of residential land values, using data from Maricopa County, Arizona. The first method involves a hedonic valuation model estimated for transactions of vacant lots. The second approach subtracts the depreciated cost of improvements from the value of improved properties to obtain land value as a residual. The third approach matches the sales of vacant lots with subsequent sales of the same properties once they have been developed. For each pair, we use a land price index to inflate the land price to the time of the improved property transaction and then calculate land leverage (the ratio of land to total property value). A hedonic model is estimated and used to predict land leverage for all improved properties. We conclude that the matching approach is the most promising of the methods considered.

Keywords: Land valuation; Hedonic method; Residual approach; Land leverage; Matching approach (search for similar items in EconPapers)
JEL-codes: R31 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2022-06
New Economics Papers: this item is included in nep-ure
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Citations: View citations in EconPapers (3)

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Journal Article: Hedonic, residual, and matching methods for residential land valuation (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2255

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