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Hedonic House Prices Without Characteristics: The Case of New Multiunit Housing

47 Pages Posted: 8 Feb 2002  

Olympia Bover

Banco de España - Research Department; Centre for Economic Policy Research (CEPR)

Pilar Velilla

Banco de España - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: January 2002

Abstract

In this Paper we propose an alternative to traditional hedonics for estimating new multiunit housing inflation, adjusting for quality changes. By relying on the within-site variation we control in a very general way for unobserved housing characteristics using site-specific effects. Precise location, transport, traffic, closeness to services, or construction quality are some of the unobserved but typically relevant housing characteristics that may bias estimated house price inflation, even when using hedonic methods. We also estimate standard hedonic equations and compare the results to those obtained with the alternative hedonic equations with site dummies. Our dataset is fairly rich in observable housing characteristics but, nevertheless, the quality-adjusted house price evolution is quite different in some cases. The data cover the construction of new housing in some of the large Spanish cities and in the smaller towns on the outskirts of the capital during part of the 1990s.

Keywords: House prices, quality adjustment, hedonic price indices, unobservable characteristics, site specific effects

JEL Classification: C43, E31, O47, R31

Suggested Citation

Bover, Olympia and Velilla, Pilar, Hedonic House Prices Without Characteristics: The Case of New Multiunit Housing (January 2002). CEPR Discussion Paper No. 3161. Available at SSRN: https://ssrn.com/abstract=299963

Olympia Bover (Contact Author)

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Banco de España - Research Department ( email )

Alcala 50
28014 Madrid
Spain
+34 91 338 5979 (Phone)
+34 91 338 5678 (Fax)

Pilar Velilla

Banco de España - Research Department ( email )

Alcala 50
28014 Madrid
Spain
+34 91 338 5076 (Phone)
+34 91 338 5678 (Fax)

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