sajm





PDF Print E-mail
Written by Administrator   

Factors Affecting House-prices: A Study of House-owners in Bhubaneswar Using the Hedonic Pricing Model

Abhiraj Malia* , Biswajit Das** , Aurodeep Kamal*** , Bhubaneswari Bisoyi**** and Ipseeta Satpathy*****

DOI: https://doi.org/10.62206/sajm.31.1.2024.60-82

PUBLISHED : 25 JUNE 2024

Abstract

This research paper applies the Hedonic Pricing Model (HPM) method to identify the critical factors that affect the value of houses and construct a valuation model that can reliably predict the value of houses. By using the hedonic pricing model, it was found that the attributes such as location and nearby amenities have a significant impact on the price of houses. The data was collected through a survey revolving respondents involved with housing projects in the Bhubaneswar Municipal Corporation. The sample consisted of 221 individuals who have recently purchased a residential plot or apartment in Smart City Bhubaneswar or who intended to do so. The reliability of the survey instrument was tested using Cronbach’s alpha, and the data was analyzed using Regression analysis. The study reveals that structural attributes such as number of bedrooms, bathrooms, kitchens, and garage and storage facilities have a positive influence on the price of houses. In case of locational characteristics; distance from market, and workplace, and the availability of transportation facilities are statistically significant. And finally, about the neighborhood attributes; proximity to school, medical services and rate of crime in the locality has a strong influence on house prices. The tests have shown that the hedonic pricing model is a reliable and trustworthy way to estimate the value of a house.

Key Words

Bhubaneswar, Hedonic pricing model, Housing projects, Land valuation, Real estate, Regression

Author Biography

Abhiraj Malia
Assistant Professor, Kalinga Institute of Social Sciences, DU, Bhubaneswar, Odisha, India; and is the corresponding author.E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Biswajit Das
Professor KIIT School of Management, KIIT University, Bhubaneswar, Odisha, India. E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Aurodeep Kamal
Assistant Professor, Utkal University, Bhubaneswar, Odisha, India. E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Bhubaneswari Bisoyi
Assistant Professor, KIIT University, Bhubaneswar, Odisha, India. E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Ipseeta Satpathy
Senior Professor, KIIT School of Management, KIIT University, Bhubaneswar, Odisha, India. E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

References

  1. Ajayi, O., Maluleke, H., & Bagula, A. (2022). Assessing the impact of noise pollution on real estate prices using smart phones. In 2022 IEEE Conference on Information Communications Technology and Society (ICTAS), March, 1-6.
  2. Akinsomi, O., Mkhabela, N., & Taderera, M. (2018). The role of macro-economic indicators in explaining direct commercial real estate returns: Evidence from South Africa. Journal of Property Research, 35(1).
  3. Ahlfeldt, G., & Maennig, W. (2009). Arenas, arena architecture and the impact on location desirability: The case of Olympic Arenas’ in Prenzlauer Berg, Berlin. Urban Studies, 46(7), 1343-1362.
  4. Benjamin, J., Zietz, E., & Sirmans, S. (2003). The environment and performance of industrial real estate. Journal of Real Estate Literature, 11(3).
  5. Black, S. E. (1999). Do better schools matter? Parental valuation of elementary education. The Quarterly Journal Of Economics, 114(2), 577-599.
  6. Bourassa, S. C., & Peng, V. S. (1999). Hedonic prices and house numbers: The influence of fengshui. International Real Estate Review, 2(1), 79-93.
  7. Burian, J., Mackù, K., Zimmermannová, J., & Koèvarová, B. (2018). Spatiotemporal changes and dependencies of land prices: A case study of the city of Olomouc. Sustainability, 10(12).
  8. Carroll, T. M., Clauretie, T. M., & Jensen, J. (1996). Living next to godliness: Residential property values and churches. The Journal of Real Estate Finance and Economics, 12, 319-330.
  9. Chattopadhyay, S. (1999). Estimating the demand for air quality: New evidence based on the Chicago housing market. Land Economics, 22-38.
  10. Chau, K. W., & Chin, T. L. (2003). A critical review of literature on the hedonic price model. International Journal for Housing Science and its Applications, 27(2).
  11. Chau Wing, K., Kei Wong, S., & YimYiu, C. (2004). The value of the provision of a balcony in apartments in Hong Kong. Property Management, 22(3), 250-264.
  12. Chay, K. Y., & Greenstone, M. (2005). Does air quality matter? Evidence from the housing market. Journal of Political Economy, 113(2), 376-424.
  13. Chen, D., & Chen, S. (2017). Particulate air pollution and real estate valuation: Evidence from 286 Chinese prefecture-level cities over 2004-2013. Energy Policy, 109, 884-897.
  14. Chica-Olmo, J., González-Morales, J. G., & Zafra-Gómez, J. L. (2020). Effects of location on Airbnb apartment pricing in Málaga. Tourism Management, 77, 103981
  15. Das, B., & Pani, A. K. (2005). Real estate market: New economy new business. Excel Books India.
  16. Das, D., Bisoyi, B., Satpathy, I., & Das, B. (2021). Urban infrastructure and Special Economic Zone (SEZ): Challenges for corporate land alienation. Recent Developments in Sustainable Infrastructure, 943-950, Springer, Singapore
  17. Das, S., Mitra, A., & Kumar, R. (2017). Do neighbourhood facilities matter for slum housing? Evidence from Indian slum clusters. Urban Studies, 54(8).
  18. Downes, T. A., & Zabel, J. E. (2002). The impact of school characteristics on house prices: Chicago 1987–1991. Journal of Urban Economics, 52(1), 1-25.
  19. Du, J., Thill, J. C., & Peiser, R. B. (2016). Land pricing and its impact on land use efficiency in post-land-reform China: A case study of Beijing. Cities, 50.
  20. Efthymiou, D., & Antoniou, C. (2015). Measuring the effects of transportation infrastructure location on real estate prices and rents: Investigating the current impact of a planned metro line. EURO Journal on Transportation and Logistics, 3(3), 179-204.
  21. Fasakin, J. O., Basorun, J. O., Bello, M. O., Enisan, O. F., Ojo, B., & Popoola, O. O. (2018). Effect of land pricing on residential density pattern in Akure, Nigeria. Advances in Social Sciences Research Journal, 5(1).
  22. Frew, J., & Wilson, B. (2002). Estimating the connection between location and property value. Journal of Real Estate Practice and Education, 5(1), 17-25.
  23. Forrest, D., Glen, J., & Ward, R. (1996). The impact of a light rail system on the structure of house prices: A hedonic longitudinal study. Journal of Transport Economics and Policy, 15-29.
  24. Gaolu, Z. (2015, August). The effect of Central Business District on house prices in Chengdu Metropolitan area: A hedonic approach. In 2015 AASRI International Conference on Circuits and Systems (CAS 2015), 349-352, Atlantis Press.
  25. Goodman, A. C. (1978). Hedonic prices, price indices and housing markets. Journal of Urban Economics, 5(4), 471-484.
  26. Heyman, A. V., & Sommervoll, D. E. (2019). House prices and relative location. Cities, 95, 102373.
  27. Herath, S. K. & Maier, G. (2010). The hedonic price method in real estate and housing market research.A review of the literature. Institute for Regional Development and Environment, 1-21.
  28. Huang, P. (2018). Impact of distance to school on housing price: Evidence from a quantile regression. The Empirical Economics Letters, 17(2), 149-156.
  29. Huh, S., & Kwak, S. J. (1997). The choice of functional form and variables in the hedonic price model in Seoul. Urban Studies, 34(7), 989-998
  30. Hussain, T., Abbas, J., Wei, Z., & Nurunnabi, M. (2019). The effect of sustainable urban planning and slum disamenity on the value of neighboring residential property: Application of the hedonic pricing model in rent price appraisal. Sustainability, 11(4), 1144.
  31. Jackson, C., & White, M. (2005). Inflation and rental change in industrial property: A multilevel analysis. Journal of Property Investment & Finance, 23(4).
  32. Janssen, C., Söderberg, B., & Zhou, J. (2001). Robust estimation of hedonic models of price and income for investment property. Journal of Property Investment & Finance, 19(4), 342-360.
  33. Kong, Y., Glascock, J. L., & Lu-Andrews, R. (2016). An investigation into real estate investment and economic growth in China: A dynamic panel data approach. Sustainability, 8(1).
  34. Koomen, E., & Buurman, J. (2002). Economic theory and land prices in land use modeling. In 5th AGILE Conference on Geographic Information Science, Palma (Balearic Islands Spain), 7, April 25-27.
  35. Lancaster, K. J. (1966). A new approach to consumer theory. Journal of Political Economy, 74(2).
  36. Li, M. M., & Brown, H. J. (1980). Micro-neighborhood externalities and hedonic housing prices. Land Economics, 56(2), 125-141.
  37. Mallick, H., & Mahalik, M. K. (2015). Factors determining regional housing prices: Evidence from major cities in India. Journal of Property Research, 32(2).
  38. Millhouse, J. A. (2005).Assessing the effect of architectural design on real estate values: A qualitative approach (Doctoral dissertation, Massachusetts Institute of Technology).
  39. Murty, M. N., & Gulati, S. C. (2005). A generalized method of hedonic prices: Measuring benefits from reduced urban air pollution. Institute of Economic Growth.
  40. Nayar, S. (1996). The Indian real estate market: A comprehensive analysis for the foreign investor (Doctoral dissertation, Massachusetts Institute of Technology).
  41. Nguyen, M. L. T., Bui, T. N., & Nguyen, T. Q. (2019).Relationships between real estate markets and economic growth in Vietnam. The Journal of Asian Finance, Economics and Business, 6(1).
  42. Nunns, P. (2015). The value of land, floor space, and amenities: A hedonic price analysis of Auckland property sales. In New Zealand Association of Economists Annual Conference, June, 37.
  43. Rodriguez, M., & Sirmans, C. F. (1994). Quantifying the value of a view in singlefamily housing markets. Appraisal Journal, 62, 600-600.
  44. Rosen, S. (1974). Hedonic prices and implicit markets: Product differentiation in pure competition. Journal of Political Economy, 82(1).
  45. Rungskunroch, P., Yang, Y., & Kaewunruen, S. (2020). Does high-speed rail influence urban dynamics and land pricing?. Sustainability, 12(7).
  46. Samarasinghe, O., & Sharp, B. (2010). Flood prone risk and amenity values: A spatial hedonic analysis. Australian Journal of Agricultural and Resource Economics, 54(4), 457-475.
  47. Sarathy, P. S., & Patro, S. K. (2013). The role of opinion leaders in high-involvement purchases: An empirical investigation. South Asian Journal of Management, 20(2), 127.
  48. Schwartz, A. E., Susin, S., & Voicu, I. (2003). Has falling crime driven New York City’s real estate boom?. Journal of Housing Research, 101-135.
  49. Sedgley, N. H., Williams, N. A., & Derrick, F. W. (2008). The effect of educational test scores on house prices in a model with spatial dependence. Journal of Housing Economics, 17(2), 191-200.
  50. Sharma, A. K. (2009). Modernization of railway stations in India: A case for public-private partnership with special reference to New Delhi railway station. South Asian Journal of Management, 16(1), 102-116.
  51. So, H. M., Tse, R. Y., & Ganesan, S. (1997). Estimating the influence of transport on house prices: Evidence from Hong Kong. Journal of Property Valuation and Investment, 15(1), 40-47.
  52. Tatt, S. L., Yi, M. N. P., & Lin, A. F. (2015). Factors affecting prices of condominiums nearby developing MRT stations in Kuala Lumpur. In 21st Annual Pacific-Rim Real Estate Society Conference, January.
  53. Waddell, P. (2011). Integrated land use and transportation planning and modelling: Addressing challenges in research and practice. Transport Reviews, 31(2), 209-229.
  54. Welch, T. F. (2010). Estimating the effects of transportation infrastructure proximity using multiple longitudinal regression methods: The case of Atlanta (Doctoral dissertation, Master’s Thesis, Florida State University)
  55. YavuzOzalp, A., & Akinci, H. (2017). The use of hedonic pricing method to determine the parameters affecting residential real estate prices. Arabian Journal of Geosciences, 10(24).
  56. Zheng, S., Cao, J., Kahn, M. E., & Sun, C. (2014). Real estate valuation and cross-boundary air pollution externalities: Evidence from Chinese cities. The Journal of Real Estate Finance and Economics, 48, 398-414