Determinant Factors of Housing Prices Identified by Hedonic Regression Analysis

Abstract

Information asymmetry in real estate market can potentially lead to a breakdown in the functioning of the market and large expenses for consumers to collect desired information. To help resolve the information problem, a clear understanding of the determinant factors of land and housing prices and the values of these factors is indispensable. Therefore, economic analyses of land and housing prices are of critical importance. In particular, the values of local environmental factors such as sunshine, the quality of neighboring buildings, and abundance of trees in neighboring areas ought to be clarified because such information is rarely informed through the current information provision system yet emphasized by most residents. To raise an example of such research, the work of Gao and Asami (2001) is introduced in this article. It demonstrated that environmental factors significantly affect the prices of real estate properties, and that quantitatively identifying their economic values provided an effective tool for policy analysis. These outcomes implies that refining the information provision framework may not only improve the functioning of real estate market and benefit consumers, but also promote the research of urban policies.