Valuation of Residential Properties by Hedonic Pricing Method- A State of Art

Abstract

The Hedonic Pricing Method (HPM), also known as hedonic Regression method (HRM) and Hedonic Demand Method (HDM) is used in estimating the value of attributes or the demand of attributes. Hedonic goods are analyzed by "Hedonic price model" and it makes possible to calculate the suitability of price indices in the commodity markets. Hedonic attributes involve immovable properties, such as apartment, computers, cars, home things, mobile phones etc. The features of these goods form their prices. Marginal effects of features of attributes in forming the prices of hedonic goods can be determined by this approach. In other words, the parameters obtained from estimating the hedonic price model describes the marginal value of characteristics of goods. The HPM has been widely used in real estate and housing market research in the recent past. The idea behind the HPM is that the commodities are characterized by their constitute properties, hence the value of a commodity can be calculated by adding up the estimated values of its separate properties. In this paper, emphasis is given on case study related to applicability of hedonic Pricing method, its methodology, comparison with other methods and its limitations.