Mass Appraisal for Urban Land in Korea: A Hybrid Hedonic Pricing Approach

21 Pages Posted: 30 Nov 2021

See all articles by Jengei Hong

Jengei Hong

Handong Global University - Management & Economics

Doojin Ryu

Sungkyunkwan University

Date Written: November 29, 2021

Abstract

This study proposes a hybrid hedonic model that improves the performance of mass appraisals in residential property markets. Our model is designed to directly capture the value of locations without assuming a specific functional form or the factors affecting it. The K-means clustering algorithm serves as subdividers to allocate indicators to samples according to locational similarity. The advantage of this approach is that it allows us to measure the value of a location using only its latitude and longitude. We examine the predictive accuracy of the model in an out-of-sample context based on apartment transaction data for Seoul, the largest city in Korea. Our results show that the explanatory power of the proposed model is significantly better than that of the conventional model.

Keywords: Hedonic model, Machine learning, Mass appraisal, Locational effect, K-means clustering

JEL Classification: C31, C63, O18

Suggested Citation

Hong, Jengei and Ryu, Doojin, Mass Appraisal for Urban Land in Korea: A Hybrid Hedonic Pricing Approach (November 29, 2021). Available at SSRN: https://ssrn.com/abstract=3974316 or http://dx.doi.org/10.2139/ssrn.3974316

Jengei Hong

Handong Global University - Management & Economics ( email )

United States

Doojin Ryu (Contact Author)

Sungkyunkwan University ( email )

53 Myeongnyun-dong 3-ga Jongno-ju
Guro-gu
Seoul, 110-745
Korea, Republic of (South Korea)

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