Real estate valuation based on hedonic price model
Abstract
Traditional valuation approaches used by valuers in Kenya are highly dependent on
subjective judgment in the returned values. This has been cited as a major cause of value
variability and disparities among valuers.
In this study the traditional valuation methods mainly; Cost approach, Income approach
and Market approach have been examined. Their strengths and weaknesses have been
highlighted. The study attempts to offer solution through application of Hedonic pricing
method.
The advantage of using Hedonic pricing method is that it can model the relationship
between sale price of a house and housing attributes. The hedonic pricing model
regresses each attribute to show how change in each attribute affects the house price/
value.
Using hedonic the relative monetary contribution of each factor can be estimated.
Having knowledge on the contributory factor of each attribute enables the valuer to
undertake valuation with accuracy and precision.
The procedure in application of hedonic involved first indentifying and listing the factors
that influence the value of a house. The mode of identification was through literature
search, questionnaires and interviews conducted with selected valuation firms and
property dealers who are involved in buying and selling of houses in the city of Nairobi.
From these attributes, critical house value influencing variables were chosen after
thorough statistical analysis
Citation
Masters of Arts degree in Valuation and Property ManagementSponsorhip
University of NairobiPublisher
Department of Real Estate and Construction Management, School of the Built Environment,