|M.Sc Thesis||Department of Industrial Engineering and Management|
|Supervisor:||Assoc. Prof. Ben-Zion Uri|
|Full Thesis text|
The goal of this study was to apply empirically the hedonic pricing method to various attributes of residential units in the housing market of the city of Rishon LeZion, Israel. The study investigates the possibility of the existence of real options in apartments which are located on different floor levels. The assumption was that the differences in prices serve as an indicator for the existence of “hidden” or implicit amenities which are present in the varied dwelling units. Residential property is a multidimensional commodity. Each residential unit has a unique bundle of attributes.
The heterogeneous character of the housing market is taken into account by using the hedonic pricing methodology. Another focus of this study was the issue of the behavior of hedonic housing prices with regard to the diverse socio-economic backgrounds of populations that live in different neighborhoods in the city of Rishon LeZion. The study reports housing prices across a set of major neighborhoods of Rishon LeZion with a remarkable gap between wealthy and underprivileged. This paper uses data for the city of Rishon LeZion housing market for the period of 2001-2004. The data set provides variables indicating the physical quality of residential dwelling units. The sample included a wide variety of properties from almost all neighborhoods in the city. Matching the results of the Population Census of 1995 and its data on socio-economic index and rank with the data file, I attributed an index and rank to every single dwelling unit presented in the data file.
In general the results were in line with a priori expectations. All models were significant in their explanatory power. In this research, I calculate the influence of the location of a property in a building on the top floor and on the ground floor. The findings show a strong positive contribution of these locations on the dwelling unit price.
In general, location on a higher floor contributes negatively to the price of a dwelling unit, but it might be due to the absence of an elevator. The building’s age, as a characteristic which indirectly indicates also the physical condition of the dwelling, negatively contributes to the property price. The magnitude of the contribution differs and is about 0.9-2% annually. The existence of an elevator and registered parking facilities positively influence the apartment price, significantly increasing its value.