Mats Wilhelmsson

The Impact of Traffic Noise on the Values of Single-family Houses

The objective of this paper is to provide an empirical analysis of the impact traffic noise has on the values of single-family houses. Under the assumption that negative externalities are capitalized into house values, the hedonic price method is used. Issues of asymmetric information and disequilibrium are discussed and tested. Furthermore, the cost-benefit valuation has been corrected for the existence of property tax. Noise pollution was found to have a substantial negative effect on housing values. A single-family house of SEK975 000 would sell for SEK650 000 if located near a road where noise is loud, equivalent to a total discount of 30%.

Spatial Models in Real Estate Economics

The idea that location is important in real estate economics is not new. However, the spatial dimension of real estate data is not always taken into account in traditional real estate models. Spatial econometrics is a tool that could remedy this problem. The objective of this paper is to review spatial models and apply them to typical hedonic real estate data. By doing so we gain insight into the size of bias that can occur in parameters if we do not take spatial effects into account. The conclusion is that spatial autocorrelation is present, least-square estimates may be biased and inefficient and spatial hedonic models do explain more of the price variation. However, the choice of spatial structure does affect the interpretation of parameters for variables with which it is correlated, i.e. it is a sort of multicollinearity problem. Hence, uncritical use of spatial econometrics may cause problems in the interpretation of individual parameters.

Regional house prices: An application of a two-equation model to the Swedish housing market

Purpose - The aim of this study is to investigate why housing prices differ between regions, and to estimate the speed-of-adjustment. Design/methodology/approach - A variety of factors explains the differences in the prices of single-family houses. Changes in disposable income over time and across regions as well as the cost of capital are important determinants. The model is based on a DiPasquale and Wheaton model where the developments of the house prices are a function of macroeconomic factors such as economic growth, changes in employment and interest rate. It is estimated on a two-equation error correction model: first, the long-run price equation and, second, a short-run price model. Findings - The estimates suggest that the speed-of-adjustment ranges from 16 to 78 per cent (around 50 per cent on average) depending on the region. In regions with a low population density, higher price adjustment rates are observed. Moreover, the speed-of-adjustment is higher in an upturn economy than in a downturn reflecting that negative housing stock adjustments is much slower than positive adjustments. Originality/value - The main contribution is that the speed-of-adjustment to the long-run equilibrium price for 21 regions is estimated instead of at a national level and, furthermore, cyclical asymmetry in responses is tested and such differences are found. It is estimated that the rate of adjustment to long-run equilibrium price varies considerably between regions.

Analysing location attributes with a hedonic model for apartment prices in Donetsk, Ukraine

A hedonic model is specified for asking prices for apartments in Donetsk (Ukraine). This model is used to determine statistically significant location attributes. These attributes can be used for land assessment in a city where data on the land market are lacking. Distance gradients for CBD accessibility are investigated in different geographical directions. Separate models are created for sub‐samples located inside and outside the city centre. A spatial weight matrix is used to detect spatial autocorrelation. The regression results are compared with the valuation of experts.

A method to derive housing sub‐markets and reduce spatial dependency

Housing markets are typically segmented into a number of different sub‐markets. If the sub‐markets are not included in the hedonic estimation process, parameters will be biased. Furthermore, if neighbourhood characteristics are omitted, there is a risk that spatial dependency will be present, and this will cause estimates to be biased, inefficient and inconsistent. The objective of this paper is to derive functional sub‐markets using cluster analysis to improve upon the hedonic model and reduce spatial dependency. The empirical analysis shows that cluster analysis of the residuals can remedy the problem of spatial autocorrelation. However, if the housing market under investigation is geographically large, the number of clusters will increase rapidly, if the objective is to reduce spatial dependency. The predictive performance is highly increased both in the full sample and the testing sample, but the predictive performance will be reduced if the sub‐markets created are too small and too numerous. Hence, there is a trade‐off between reducing spatial dependency and increasing the predictive power.

THE IMPACT OF CRIME ON APARTMENT PRICES: EVIDENCE FROM STOCKHOLM, SWEDEN

Abstract. This study uses data of about 9,000 apartment sales in Stockholm, Sweden, to assess the impact of crime on property prices. The study employs hedonic pricing modelling to estimate the impact of crime controlling for other factors (property and neighbourhood characteristics). Geographic Information System (GIS) is used to combine apartment sales by coordinates with offences, land use characteristics and demographic data of the population. The novelty of this research is threefold. First, it explores a set of land use attributes created by spatial techniques in GIS in combination with detailed geographical data in hedonic pricing modelling. Second, the effect of crime in neighbouring zones at one place can be measured by incorporating spatial lagged variables of offence rates into the model. Third, the study provides evidence of the impact of crime on housing prices in a capital city of a traditional welfare state, information otherwise lacking in the international literature. Our results indicate that apartment prices in a specific area are strongly affected by crime in its neighbouring zones, regardless of crime type. When offences were broken down by types, residential burglary, theft, vandalism, assault and robbery individually had a significant negative effect on property values. However, for residential burglary such an effect is not homogenous across space, and apartment prices in central areas are often less discounted by being exposed to crime than those in the citys outskirts.

The robustness of the causal and economic relationship between construction flows and economic growth: evidence from Western Europe

Our main objective is to analyse whether we have a problem of parameter heterogeneity across countries and over time in the estimation of the relationship between infrastructure investments and economic growth. The research approach concerning causality and the estimating of the long-run equilibrium is based on the error-correction model. The problem of parameter heterogeneity is handled by the use of interaction terms. The result indicates that residential construction Granger causes Gross Domestic Product (GDP) in the short and long run and it seems likely that the interaction term indicating high unemployment do add some explanation power to the model. This is not true when it comes to infrastructural and other building construction and its impact on economic growth. A high housing stock per capita seems to reduce the short-run effect. This implies that residential construction seems to have a larger effect if the accumulated residential stock is on a low level. The speed of adjustment to long-run equilibrium differs considerably between a country with a low residential capital stock and a country with a high-capital stock. Moreover, high owner occupation rates seem to be associated with a stronger relationship between residential construction and economic growth.

Improved price index for condominiums

This paper proposes a hedonic apartment price index construction method that can increase the quality of price index data for condominiums in Sweden. Currently, the public condominium price index that different actors usually refer to is based on mean and median prices per square metre. With access to a unique database with the most recent transactions data from real estate agents firms, I estimate alternative hedonic price indexes, and compare them both with each other, as well as with arithmetic mean and median price indexes.

Construction and updating of property price index series : The case of segmented markets in Stockholm

Purpose – The purpose of this paper is to construct a hedonic property price index in the segmented housing market.Design/methodology/approach – Three different research questions are investigated. The first considers how to identify separate local housing markets, with the use of a regression‐tree approach, and the second concerns when it is possible to update a price index, with a recursive regression approach. Finally, the question about seasonal adjustment is investigated.Findings – Overall, the hedonic approach is the best method to use. Moreover, the County of Stockholm is not one market in the sense that the market can be represented by only one property price index. It can be best described as a number of different sub‐markets where the property prices grow differently. The results suggest that there exist at least five different price indexes in the County of Stockholm. The results also support that recursive regressions are two appropriate methods to answer the research questions. Here, the empi...

Housing Stock and Price Adjustments in 12 West-European Countries between 1976 and 1999

Housing investment has both a direct and an indirect effect on economic growth. It is therefore of great importance to understand the mechanisms underlying the housing market. This paper uses an error‐correction model to analyse the dynamics of the housing markets in 12 West European countries for the period 1976–99. The empirical results indicate that it is, to some degree, possible to consider the European housing market as one market. The relationships between housing stock and its macroeconomic determinants are robust across countries. Furthermore, the results show that the price and cost elasticity of the housing supply are low. Shocks on demand and supply have small effects on the housing stock (low speed of adjustment on quantity). On average, shocks take 4 years before being fully incorporated into the housing stock. On the other hand, shocks have a substantial effect on prices (high speed of adjustment on price). Supply‐side and demand‐side shocks have an instant effect on housing prices.