Alternative Approaches to Commercial Property Price Indexes for Tokyo

The paper studies the problems associated with the construction of price indexes for commercial properties that could be used in the System of National Accounts. Property price indexes are required for the stocks of commercial properties in the balance sheets and related price indexes for the land and structure components of a commercial property are required in the balance sheet accounts for the calculation of the Multifactor Productivity of the Commercial Property Industry. The paper uses a variant of the builder's model that has been used to construct Residential Property Price Indexes. Geometric depreciation rates are estimated for commercial offices in Tokyo using assessment data for REIT. The problems associated with the decomposition of property value into land and structure components are addressed. The problems associated with depreciating capital expenditures on buildings and with measuring the loss of asset value due to early retirement of the structure are also addressed.     

An Hedonic Analysis of the Rental Office Market in the Tokyo Central Business District: 1985–1994 Fiscal Years

We study the rental office market in the Tokyo central business district by estimating hedonic equations for the office rent for 1985–94 fiscal years. This period includes the "Bubble" of asset prices, followed by its deflation. We find that the characteristics related to transportational conveniences are less effective in explaining office rents than the characteristics related to the agglomeration of offices and the amenity characteristics of the office buildings themselves. Using a skewed error-term specification, we show that the discount in rental transactions is not irrelevant. The hedonic office rent indices and possible policy implications are also presented.
JEL Classification Numbers: L85, R32.     

Eco-labeling in commercial office markets: Do LEED and Energy Star offices obtain multiple premiums?

This paper investigates the effect of eco-labeling on rental rates, sale prices and occupancy rates. The consensus emerging from previous studies appears to be that investors in and occupiers of eco-labeled buildings obtain a bundle of benefits related to lower operating costs, reputation benefits and productivity higher. In this study, a hedonic model is used to test whether the presence of an eco-label has a significantly positive effect on rental rates, sale prices and occupancy rates of commercial office buildings in the US. The results suggest that office buildings with Energy Star or LEED eco-labels obtain rental premia of approximately 3-5%. Dual certification produces an additive effect with rental premia estimated at 9%. Respective sale price premia for Energy Star and LEED labeled office buildings are 18% and 25%. The sale price premium for dual certification is estimated at 28-29%. An occupancy premium could not be confirmed for LEED labeled office buildings and only a small positive occupancy premium was found for Energy Star.     

Expert opinion versus actual transaction evidence in the valuation of non-market amenities

Actual property values are overwhelmingly employed as a dependent variable in hedonic pricing models. Yet, assessed property values are generally more readily available than actual sales values and have, in some studies, been used in lieu of market prices. In this study, we compare estimates of different non-market amenity values based on actual transactions and assessed values. We estimate a Seemingly Unrelated Regression (SUR) model with two hedonic price equations, one with actual market values as the dependent variable and the other with assessed property values, and compare the resulting estimates of shadow prices for open space amenities. We also take into account spatial autocorrelation and combine Method of Moment estimates of the spatial parameters in both equations to create our test statistic. The results indicate that we cannot accept the hypothesis that the impacts of open space on property values are the same for actual sales and assessed values. Moreover, we do observe some differences between the distributions of assessed versus sales values, although the difference between the sizes of open space effects measured within the two equations is rather limited. Thus, while this one study is insufficient to enable one to draw definitive conclusions, there remains the possibility that policy makers cannot reliably base decisions on amenity values obtained from a hedonic model using assessed values.     

On Land Price Formation: Bubble Versus Option

This paper investigates the theory of land price formation, taking into consideration the fact that an "option" is implicitly attached to land. Using a theoretical model, it tries to explain the land price bubbles in Japan in the late 1980s as the result of investors' expectations of alternative uses of the land. The model is estimated and validated using data on the Tokyo metropolitan residential area. The modelling exercise also determines the extent to which the option contributes to the formation of land prices. It is shown that the separation of the land price from its fundamental value can be satisfactorily explained by the option property of land.
JEL Classification Numbers: C53, G12, R14.     

Measuring the Benefits of Neighbourhood Park Amenities: Application and Comparison of Spatial Hedonic Approaches

The hedonic price method was used to estimate the influence of parks on the rental prices of single-room dwellings in Setagaya Ward, Tokyo, Japan. A simple least squares method is not optimal when the data set contains spatial autocorrelation. To improve the accuracy of estimates, we employed spatial autoregression and kriging models, resulting in a higher validity of the spatial models compared to the least squares model. Kriging models were superior to others particularly in terms of prediction accuracy, indicating that these models should be employed if the objective is superior prediction rather than estimation. The results showed that the effect of parks on property values varied with the buffer distance and park size.     

Using Scanner Data to Estimate Country Price Parities: A Hedonic Regression Approach

This paper uses scanner data from the bar-code readers of retailers to provide estimates of inter-country price parities at the level of the basic heading. The use of such data is appealing given its extensive coverage of transactions, information on weights, prices and characteristics of items at a highly detailed level. The study uses dummy variable hedonic and exact/superlative hedonic index number formulations applied to an inter-country context for both bilateral and multilateral comparisons. Unlike conventional methods, such methods are not confined to matched samples comparisons and thus make use of the entire sample. Their application extends to price survey data using checklists on characteristics. The application is to scanner data on about 1 million transactions for television sets over two months in three countries. It is, to the authors' knowledge, the first such use of scanner data and application of the above hedonic frameworks in this context.     

Does clean air matter in developing countries' megacities? A hedonic price analysis of the Jakarta housing market, Indonesia

Despite numerous hedonic studies on the value of clean air in developed countries, the lack of similar studies in less developed countries has raised the question as to whether clean air also matters in developing countries' megacities. As an attempt to fill this gap, we apply a hedonic property value analysis, the method commonly used to infer the value of clean air in developed countries, using the combination of data on housing rental prices and their characteristics from the Indonesian Family Life Survey, and data of the ambient level of six different pollutants in Jakarta, Indonesia. The result indicates that, in the cases of lead, total hydro carbon (THC), and SO₂, air pollutants have a negative association with property value; i.e., housing rental price. The relationship is at 5% level of significance for lead and 10% level for THC and SO₂. This paper estimates that per family value of clean air in Jakarta ranges from US$28 to US$85 per μg/m³.     

Exploring the hedonic value of ambient water quality: A local watershed-based study

Non-point source water pollution of local watersheds can result from various sources but is tied most closely to runoff from impervious surfaces associated with development activities such as roadways, parking lots and large commercial structures. This research investigates the value of ambient water quality as measured by data from twenty-two monitoring stations located throughout a local watershed in Maryland; the St. Mary's River watershed. A hedonic property value model is used to investigate the marginal implicit values of the following water quality variables: total suspended solids and dissolved inorganic nitrogen. The econometric results indicate the marginal implicit prices associated with a one milligram per liter change in total suspended solids and dissolved inorganic nitrogen, are $− 1086 and $− 17,642, respectively.     

BENEFITS OF HAZARDOUS WASTE CLEANUP: NEW EVIDENCE FROM SURVEY- AND MARKET-BASED PROPERTY VALUE APPROACHES

This article compares the discrete choice random utility model and the hedonic property value model in estimating the benefits of cleaning up Waukegan Harbor, a Superfund site on the Great Lakes. The study uses survey-based conjoint choice data on housing preferences and market data on housing transactions. The research finds that the benefit estimates for different levels of cleanup are quite comparable between the models. The estimates compare very well with those of some previous studies. The results of the study suggest that tax increment financing by the local government is a feasible option to fund cleanup.     

Residential property price differentials of waste plants: evidence from Beijing,China

As a primary source of urban pollution, waste plants release toxic gases and polluted waste water that can cause great harm to human health and contaminate water resources. The adverse impact of waste plants on environmental threaten the quality of life of surrounding residents which will be reflected in residential property values. In this study, we develop a hedonic price model to estimate the environmental externalities of waste plants based on a panel dataset for real-estate transactions in Beijing from 2011 to 2015. We apply fixed effects and a Heckman selection model to control for omitted variable bias and sample selection bias and then construct price counterfactuals for properties. The price differentials between expected and counterfactual prices are then calculated. Our empirical results suggest that waste plants negatively influence residential property prices. Additionally, the influences of other factors, such as school district, traffic convenience, and average housing area, on property prices are consistent with common sense, though they are weakened for properties within three kilometers of waste plants.     

Property Prices and Exposure to Multiple Noise Sources: Hedonic Regression with Road and Railway Noise

This study examines the effect of road and railway noise on property prices. It uses the hedonic regression technique on a Swedish data set that contains information about both road and railway noise for each property, and finds that road noise has a larger negative impact on the property prices than railway noise. This is in line with the evidence from the acoustical literature which has shown that individuals are more disturbed by road than railway noise, but contradicts recent results from a hedonic study on data of the United Kingdom.     

Commercial-to-residential land-use conversion and residential recentralization in large cities

I examine the long-term impact of a real estate bubble on the land-use patterns of Tokyo and Osaka from 1980 to 2003 and find that fluctuations in land prices reflected changing demand for commercial land relative to that for residential land, which, in turn, affected housing supply and residential location choices. During the real estate bubble, land developers favored commercial over residential development because the perceived productive value of commercial land increased sharply. Thus, daytime population in central cities increased and residential population fell. During the economic downturn, however, the demand for commercial space fell, houses were favored by land developers and residents were recentralized. My causal estimates show that the commercial-to-residential land-use conversion can explain approximately 9% to 16% of the housing starts after the bubble burst in Tokyo and Osaka, and their populations would have been reduced by 2% to 3% otherwise. The effect is more prominent in their central business districts. My findings provide a novel explanation for the recent changes in central neighbourhoods.     

Estimating Quality‐adjusted Price Changes: Method and Application to VCRs

This paper uses scanner data to generate estimates of quality‐adjusted price changes for video‐recorders. We use hedonic regressions to derive estimates of the changing worth of each quality component. These are then applied to weighted changes in the mix of quality attributes of products to derive estimates of quality‐adjusted price (QAP) changes. The data source used is electronic‐point‐of‐sale (EPOS) scanner data that are available for a wide range of goods. This study provides an example of how such methods can be more widely applied. The estimates of QAP changes correspond to constant‐utility, (hedonic) cost‐of‐living indexes defined in economic theory as the ratio of expenditure functions at constant utility allowing for changing prices and characteristics of goods. This method is proposed as an improvement on the existing direct method , which takes its estimates directly from the coefficients associated with 'time dummies' in a hedonic regression. We finally undertake a matching process, akin to that used by statistical offices, and compare the results. Direct comparisons with RPI estimates and these hedonic approaches are not easy since the approaches use quite different data sets. Our replication of a procedure akin to that used for the RPI on the scanner data set provides insights into sources of potential bias.     

Space-time approach to commercial property prices valuation

There exists three ways of approaching real estate prices: the cost approach, the market data approach and the income capitalization approach. In this article, we propose an improvement of the market data approach that takes into account the spatial component. In particular, we propose a modified market data approach based on interpolation, being the structure of the spatial correlation between the prices of properties the main factor to obtain the weights. Interpolation methods have been widely used for estimating real estate prices, but they do not take into account the structure of their spatial dependence. Although this drawback is overcome by kriged estimation, in the case of the prices of commercial properties, they do not provide good estimates because the scarceness of the market information. This is why auxiliary information is needed and cokriging methods are used to obtain estimates that are more accurate. The aim of this article is the comparison of cokriged estimation of premises prices in two different temporal moments in the emblematic old part of Toledo city (Spain), using housing prices as an auxiliary random function due to their strong correlation with the main one. Cokriging, kriging and inverse distance weighting results are compared.     

Hedonic models and air pollution: Twenty-five years and counting

This paper reports a meta analysis of how effectively hedonic property models have detected the influence of air pollution on housing prices. Probit estimates are reported describing how data, model specification, and local property market conditions in cities represented in thirty-seven studies influence the ability of hedonic models to uncover negative, statistically significant relationships between housing prices and air pollution measures.Partial support for this research was provided by the Russell Sage Foundation. Thanks are due David Cordray, Heidi Hartman, and Larry Hedges of the Foundation's Meta-Analysis Panel for constructive comments, to Ray Palmquist for suggestions and assistance in assembling the results from his studies, to Rick Freeman and Tom Tietenberg and two anonymous referees for comments on the research, and to Barbara Scott for constructive editing of earlier drafts of this paper.     

基于特征价格的城市交通对房价影响分析

因城市交通的改善能明显改变周边物业的可达性和用地性质,促进土地开发强度,带来周边房地产价值的上涨。因而文章从房地产市场中消费者的角度,讨论了城市交通成本的影响因素,在此基础上构建城市交通成本与房地产价格相互影响的特征价格模型,并从理论上对模型提出了验证方法,最后以重庆市的交通为例进行了实证分析。     

Chained,exact and superlative hedonic price changes: estimates from microdata

Scanner data are used to calculate chained, exact (and superlative) hedonic price indexes for television sets. The data source is available for a wide range of goods, the application providing an example of how this method can be more widely applied. The indexes correspond to constant utility, hedonic cost-of-living indexes. The approach improves on the existing direct method, which takes its estimates directly from the coefficients on time dummies in a hedonic regression. It also improves on the matched model method used by statistical agencies. The differences between actual price changes and exact hedonic quality-adjusted price changes are found to be substantial. Base-period and current-period weighted exact hedonic indexes are similar, thus providing good approximations to a superlative index. Estimates from the direct, dummy variable approach were compared to the superlative indexes. The disparities between the results argue for caution in the use of the direct, dummy variable approach to estimating quality-adjusted price changes.     

The Amenity Value of English Nature: A Hedonic Price Approach

Using a hedonic property price approach, we estimate the amenity value associated with proximity to habitats, designated areas, domestic gardens and other natural amenities in England. There is a long tradition of studies looking at the effect of environmental amenities and disamenities on property prices. But, to our knowledge, this is the first nationwide study of the value of proximity to a large number of natural amenities in England. We analysed 1 million housing transactions over 1996–2008 and considered a large number of environmental characteristics. Results reveal that the effects of many of these environmental variables are highly statistically significant, and are quite large in economic magnitude. Gardens, green space and areas of water within the census ward all attract a considerable positive price premium. There is also a strong positive effect from freshwater and flood plain locations, broadleaved woodland, coniferous woodland and enclosed farmland. Increasing distance to natural amenities such as rivers, National Parks and National Trust sites is unambiguously associated with a fall in house prices. Our preferred regression specifications control for unobserved labour market and other geographical factors using Travel to Work Area fixed effects, and the estimates are fairly insensitive to changes in specification and sample. This provides some reassurance that the hedonic price results provide a useful representation of the values attached to proximity to environmental amenities in England. Overall, we conclude that the housing market in England reveals substantial amenity value attached to a number of habitats, designations, private gardens and local environmental amenities.     

Do commercial real estate prices have predictive content for GDP?

Using a uniquely compiled database concerning rental prices of commercial real estates, which are property of the largest broker in the Netherlands, we examine whether these prices have predictive value for quarterly economic growth. In contrast to related studies, we document that the mean price contains no relevant information, whereas other properties of the price distributions have. We show that these distributions can be described by mixtures of two distributions, reflecting low-end and high-end price segments. Our main findings are that higher economic growth is predictable from more new buildings being rented, more variation in the price levels and a larger size of the low-price segment, while lower economic growth emerges when the differences in prices between high-end and low-end segments increase and when the average price level in the low-price segment increases.