Application Of The Hedonic Price Model In Second-hand Housing Price Appraisal

During the entire trading process of second-hand housing, reasonable appraisal for the price, which is crucial to the trading fairness and justice, plays a key role in the process of successful trading. During the investigation on the real estate agencies in Kunming city, the author finds that there is no modeling appraisal tool in the pricing of the second-hand housing trades. Due to the discretionary pricing for second-hand housing, when conducting second-hand housing sales business, most real estate agencies fail to conform to the standards of pricing and thus are unable to give the property owner a reasonable and convincing suggestion, which leads to the unrealistic market price of second-hand housing and severely affects the results of trading.With regard to the trading price of second-hand housing in Kunming city, the characteristics significantly affect the housing price as most second-hand houses in the market are located in prosperous downtown area with perfect supporting life facilities. Upon an overall consideration of the influence exerted by building, neighborhood and location characteristics on pricing, price appraisal based on housing characteristic utilities of the consumers, and benefits maximization-centered price appraisal for consumers, the Hedonic Price Model can better reflect benefits maximization and therefore, can avoid price discrepancy caused by man-made factors. Compared with traditional pricing methods, it is distinctively advantageous to make research on the price of commercial housing with hedonic price theory. Firstly, upon an overall consideration of various factors affecting the price of commercial housing in the city, the hedonic price theory examines the commodity value comprehensively through an integrated consideration of commodity characteristic factors and market factors. Secondly, the hedonic price theory can help interpreting the market from multi directions. Thirdly, the Hedonic Price Model can adapt to the market changes without delay and it can be adjusted in accordance with practical needs.In the practical analysis for model establishment, due to some objective reasons such as the inaccessibility to sample data and difficulties in quantifying some factors, there are few characteristics available for analysis in practical operation. Upon the basis of massive data consulting, and taking into consideration the current situation, features and characteristics of sampling data of Kunming city, the thesis uses SPSS15.0statistics software to make regression analysis with9defined explanatory variables including the distance to the Green Lake Area, traffic accessibility, floor space, age of the building, decoration, storey, supporting life facilities, entertainment, and auxiliary education facilities. Among linear model, half-logarithm model and logarithm model, the thesis chooses to make analysis with half-logarithm model in accordance with the results of the regression analysis and statistics examination.After a detailed regression analysis, the four factors, including floor space, traffic accessibility, distance to Green Lake and age of the building can be applied to the regression equation. Through the test of significance, variance analysis, co linearity diagnostics, equal variances assumed test, orthostate test for residual as well as heteroskedasticity regression, a conclusion can be drawn that the half-logarithmic model can generally satisfy the equal variance assumption, normal assumption and independence assumption; this model also boasts a goodness of fit which can provide a sound account for its feasibility. Hence, the Hedonic Price Model for second-hand housing in Kunming can be established.This thesis is divided into four parts according to its theme of research as well as the significance of the theme. An outline can be summarized as follows:The first part serves as an introduction. It provides the relevant knowledge of real estate, as well as the present state and some problems of Kunming real estate market. The starting point of this part is the necessity of developing a second-hand housing trade. After a detailed analysis of the second-hand housing market in Kunming, an issue of valuation is put forward, and the need of establishing the Hedonic Price Model for second-hand housing in Kunming is clarified. The second part is a literature review. After the limitations of traditional price theories are pointed out, the advantages of characteristic theory of price in analyzing the price of second-hand housing can be illustrated.The third part focuses on a positive analysis of the Hedonic Price Model for second-hand housing in Kunming. This part provides a model for analyzing the price of second-hand housing, and elaborates the selection of function and characteristic variables. Data and examples needed for analysis are obtained through market research. After the data processing, testing and detailed regression analysis, the model can be established.The last part is the conclusion part. This part also voices a prediction for further research.This model has filled in a gap on the price appraisal of second-hand house trade in Kunming; it works with more efficiency than the present methods for this model; lays a theoretical basis for an efficient and reasonable price; reduces the time before listing; facilitates the selling of second-hand housing; and raises the yield of housing trade. Hence, the formation of this model can be accredited with operation significance.Due to the complexity of the second-hand housing trades, there are many factors affecting the pricing of the second-hand housing, and the valuation model has not been verified in real life, therefore the establishment of hedonic price model for second-hand house trades in Kunming is only a trial and test. During the process of establishing the second-hand housing appraisal model, the writer has also discovered some problems and incompleteness of the model.Firstly, as the collected second-hand housing trade data is only limited to the zone within the second loop of Kunming’s city centre, and the sample data collected is very limited, the appraisal model at this stage is only a trial and testing. For the wide application of this model in Kunming city, continuous improvement is required and the zoning process must also be approved by relevant government ministries.Secondly, the trading data affected by special features involve various government departments. Since these data are not publicly available, the ministry’s special feature trading data collection is limited, and collection of overall data would face certain difficulty, the influencing factors for the trade prices (such as air pollution level, environmental degradation, etc) can not be fully investigated. Therefore, this pricing model would have limitations when it is applied.Thirdly, when this model was applied to analyze the pricing of second-hand housing, the data collected are all from the month of April, therefore the sample collection is very limited and more related data are still needed to enhance further analysis in the future studies.Fourthly, the follow-up research work can be started with collecting the second-hand house trading data in Kunming and accumulating trade pricing information and other influential factors. Based on the data collection, a much deeper research can be conducted with the aim of a broader application of Hedonic Price Model on the basis of increasing the practicality, adaptability and recognition of the Hedonic Price Model for Kunming’s second-hand housing trade.