Hedonic Property Valuation Models: Are Subjective Measures of Neighborhood Amenities Needed?

Common applications of hedonic residential property valuation models have relied on proxy measures of neighborhood amenities rather than directly measured subjective evaluations. While this approach simplifies data collection, there is reason to suspect that the use of proxy measures has degraded the accuracy of hedonic valuation models. The extent to which the use of proxy measures may decrease predictive accuracy, and fail to capture the effect of neighborhood amenities, has not been reported previously. The results presented here show that direct subjective measures yield only modest improvements in price prediction. Careful use of proxy measures for neighborhood amenities appears to be cost efficient for large-scale appraisal work.