An investigation into the hedonic price analysis of the structural characteristics of residential property in the West Rand

摘要

A vast amount of literature on hedonic price modelling has been formulated on overseasudproperty markets. Very little currently exists in South Africa and this poses a risk forudsellers and estate agents of a residential property when listing it on the open market, asudthis could result in an extended list period, reducing the original asking price. This paperudseeks to examine Gauteng’s West Rand residential property market and formulate audmulti-variate regression model to best predict property prices, determined by a property’sudstructural characteristic. The research tracks residential sales from 1996 to 2009, audthirteen-year sample period from which a composite property index, to account forudinflation and real house price growth, has been formalised. Correlation and regressionudanalysis was used to interpret the data at the relevant significance level. In order toudaccount for locational attributes present in property values, the data set was divided intoudlocational quadrants and run as dummy variables. A further regression was run on audscreened data set to create an ordinary least squares equation that could be used to showudthe relationship between property values and structural characteristics. The resultsudindicated a good fit with an R2 of 69.5%. This regression was then applied practically toudpredict property prices for houses that have transacted in the West Rand property market,udand plotted along a value/price graph using the 45-degree true value frontier line. Theudrelevant results were then interpreted, and recommendations given.