Which factors capitalize into house prices? A Bayesian averaging approach |
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Authors: | David Stadelmann |
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Institution: | 1. Economics and Research Department, Eesti Pank (Bank of Estonia), Estonia pst. 13, 15095, Tallinn, Estonia;2. Department of Economics and Finance, Tallinn University of Technology, Tallinn, Estonia |
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Abstract: | This paper investigates the robustness of 33 community-specific explanatory variables for house prices in the Swiss metropolitan area of Zurich using Bayesian model averaging. The analysis suggests a new way to perform hedonic variable selection and provides a minimal list of variables which may serve as a priori constraints when predicting house prices or estimating the effect of other community-specific characteristics in a metropolitan area in a highly developed country. In the context analyzed, the main variables which capitalize with a high posterior probability are location-specific real estate characteristics, municipal taxes and expenditure for culture, health and social well-being. Demographic as well as other socio-economic controls seem to be of minor importance. |
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