An investigation into the hedonic price analysis of the structural characteristics of residential property in the West Rand
A vast amount of literature on hedonic price modelling has been formulated on overseasproperty markets. Very little currently exists in South Africa and this poses a risk forsellers and estate agents of a residential property when listing it on the open market, asthis could result in an extended list period, reducing the original asking price. This paperseeks to examine Gauteng’s West Rand residential property market and formulate amulti-variate regression model to best predict property prices, determined by a property’sstructural characteristic. The research tracks residential sales from 1996 to 2009, athirteen-year sample period from which a composite property index, to account forinflation and real house price growth, has been formalised. Correlation and regressionanalysis was used to interpret the data at the relevant significance level. In order toaccount for locational attributes present in property values, the data set was divided intolocational quadrants and run as dummy variables. A further regression was run on ascreened data set to create an ordinary least squares equation that could be used to showthe relationship between property values and structural characteristics. The resultsindicated a good fit with an R2 of 69.5%. This regression was then applied practically topredict property prices for houses that have transacted in the West Rand property market,and plotted along a value/price graph using the 45-degree true value frontier line. Therelevant results were then interpreted, and recommendations given.
Year of publication: |
2011-05-05
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Authors: | Dodds, Robert Scott |
Subject: | Price modelling | Residential property | South Africa | Property valuation |
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