Spatial Heterogeneity in Hedonic House Price Models: The Case of Austria

Tinbergen Institute Discussion Paper 13-171/VIII

Posted: 19 Oct 2013

See all articles by Marco Helbich

Marco Helbich

Heidelberg University

Wolfgang A. Brunauer

F+B Forschung und Beratung GmbH

Eric de Noronha Vaz

Ryerson University

Peter Nijkamp

VU University of Amsterdam - Department of Spatial Economics; Tinbergen Institute

Date Written: October 18, 2013

Abstract

Modeling spatial heterogeneity (SH) is a controversial subject in real estate economics. Single-family-home prices in Austria are explored to investigate the capability of global and locally weighted hedonic models. Even if regional indicators are not fully capable to model SH and technical amendments are required to account for unmodeled SH, the results emphasize their importance to achieve a well-specified model. Due to SH beyond the level of regional indicators, locally weighted regressions are proposed. Mixed geographically weighted regression (MGWR) prevents the limitations of fixed effects by exploring spatially stationary and non-stationary price effects. Besides reducing prediction errors, it is concluded that global model misspecifications arise from improper selected fixed effects. Reported findings provide evidence that SH of implicit prices is more complex than can be modeled by regional indicators or purely local models. The existence of both stationa ry and non-stationary effects imply that the Austrian housing market is economically connected.

Keywords: Spatial heterogeneity, real estate, house price models

JEL Classification: R1

Suggested Citation

Helbich, Marco and Brunauer, Wolfgang A. and de Noronha Vaz, Eric and Nijkamp, Peter, Spatial Heterogeneity in Hedonic House Price Models: The Case of Austria (October 18, 2013). Tinbergen Institute Discussion Paper 13-171/VIII, Available at SSRN: https://ssrn.com/abstract=2342121

Marco Helbich (Contact Author)

Heidelberg University ( email )

Wolfgang A. Brunauer

F+B Forschung und Beratung GmbH ( email )

Adenauerallee 28
Hamburg, 20097
Germany

Eric De Noronha Vaz

Ryerson University

350 Victoria Street
Toronto, Ontario M5B 2K3
Canada

Peter Nijkamp

VU University of Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31 20 4446091 (Phone)
+31 20 4445611 (Fax)

Tinbergen Institute

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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