Spatial and hedonic analysis of house price dynamics in Warsaw

Widłak, Marta and Waszczuk, Joanna and Olszewski, Krzysztof (2014): Spatial and hedonic analysis of house price dynamics in Warsaw.

Abstract

The aim of our article is to analyze the dynamics of housing prices in the secondary housing market in Warsaw from Q1 2006 to Q3 2013, taking into account the spatial relationship between prices. In the first part of this research we compare the geographically weighted regression with a linear regression estimated using OLS with spatial variables. In the second part, we combine the geographically weighted regression with the penalized spline regression to extract the effect of time on prices. With this method we obtain a nonlinear and more precise measure of time effects and improved goodness-of-fit statistics. We obtain a hedonic index, that is more robust against short-term changes in house prices than the usual, linear hedonic index. This is a novel approach, which has not been applied before in the case of the Polish housing market. The index allows us to show how interest rates or the housing policy influenced house prices.

• Item Type: MPRA Paper
• Language: English
• Keywords: hedonic price indices; housing prices; spatial influence on prices; geographically weighted regression; penalized splines
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R21 - Housing Demand; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R31 - Housing Supply and Markets

References

Branna J., Madej K., Będkowski M., Serdeń M., Sosiński P. and Luc M. (2012), Analiza zależności pomiędzy ceną a lokalizacją nieruchomości na przykładzie Krakowa, Roczniki geomatyki, X, 4(54).

Brunauer W., Feilmayr W. and Wagner K. (2012), A new residential property price index for Austria, Statistiken–Daten und Analysen Q3, 90-102.

Brunauer W., Lang S., Wechselberger P. and Bienert S. (2010), Additive Hedonic Regression Models with Spatial Scaling Factors: An Application for Rents in Vienna. In: Journal of Real Estate Finance and Economics 41(4), 390–411.

Brunsdon C., Fotheringham A. S. and Charlton M. (1996), Geographically weighted regression: a method for exploring spatial non-stationarity, Geographical Analysis, 28(4), 281-298.

Cellmer, R. (2010), Analiza przestrzenna dynamiki zmian cen nieruchomości lokalowych z wykorzystaniem regresji ważonej geograficznie, Acta Scientarium Polonorum, Administratio Locorum, 9(4), 5-14.

Dale-Johnson, D. and Brzeski J. W. (2001), Land value functions and land price indexes in Cracow, 1993–1999, Journal of Housing Economics, 10(3), 307-334.

Dale‐Johnson, D., Redfearn C. L. and Brzeski, W. J. (2005), From Central Planning to Centrality: Krakow's Land Prices After Poland's Big Bang, Real Estate Economics, 33(2), 269-297. Fotheringham A. S., Brunsdon C. and Charlton M. (1996), The geography of parameter space: an investigation of spatial non-stationarity, International Journal of Geographical Information Systems, 10, 605-627.

Fotheringham A. S., Brunsdon C. and Charlton M. (2002), Geographically Weighted Regression: the analysis of spatially varying relationships, Wiley.

Greiner, A. (2009), Estimating penalized spline regressions: Theory and application to economics. Applied Economics Letters 16.18 1831-1835.

Greiner, A. and G. Kauermann, (2007). Sustainability of US public debt: Estimating smoothing spline regressions. Economic Modelling 24.2: 350-364.

Hastie, T. and R. Tibshirani (1990). Generalized Additive Models. London: Chapman and Hall.

Hastie, T. and R. Tibshirani (1993). Varying Coefficient Models. Journal of the Royal Statistical Society, Series B 55, 757–796.

Ligas, M., and Kulczycki, M. (2007), Kartograficzna wizualizacja stref taksacyjnych z wykorzystaniem metod statystyki przestrzennej, Studia i Materiały, 103.

Łaszek, J. (2013), Housing in consumer’s theory, MPRA working paper.

Menéndez, P., Palacios, M. B., Bárcena Ruiz, M. J. and Tusell Palmer, F. J. (2011). Measuring the Effect of the Real Estate Bubble: a House Price Index for Bilbao (No. 2011-07). Universidad del País Vasco-Departamento de Economía Aplicada III (Econometría y Estadística).

Narodowy Bank Polski (2013). Report on the situation in the Polish residential and commercial real estate market in 2012.

Rosen S. (1974), Hedonic prices and implicit markets: product differentiation in pure competition, Journal of Political Economy 1, s. 34-55.

Reinsch, C. H. Smoothing by spline functions. Numerische mathematik 10.3 (1967), 177-183.

Ruppert, D., M. P. Wand and R. J. Carroll (2003). Semiparametric Regression. Cambridge: Cambridge University Press.

Tomczyk E. and Widłak M. (2010), Measuring price dynamics: evidence from the Warsaw housing market, Journal of European Real Estate Research, Vol. 3, Issue 3, 203 - 277.

Tusell F., M. B. Palacios, M. J. Bárcena and P. Menéndez (2013), A Real-Time Property Value Index based on Web Data, Chapter 10 in Y. Zhao and Y. Cen (Eds.). Data Mining Applications with R. Academic Press, Elsevier.

Venables, W. and B. Ripley (2003). Modern applied statistics with S, Volume 4. New York: Springer.

Waszczuk J. (2013), Przestrzenne modele ekonometryczne na przykładzie warszawskiego rynku nieruchomości mieszkaniowych, Bezpieczny Bank, 169-191.

Widłak M. and Nehrebecka N. (2011), Zróżnicowanie cen mieszkań i ich dynamiki – ujęcie regresji kwantylowej, Wiadomości statystyczne, Warszawa, Maj 2011.

Widłak M. (2013), Study of factors that differentiate housing prices and the possibility of their use at NBP, In: Report on the situation in the Polish residential and commercial real estate market in 2012, NBP.

Wood, S. (200). Generalized additive models: an introduction with R. CRC press.