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A Decomposition approach for Assessing Land Leverage and Depreciation Rate on the Real Estate Market – Evidence from Warsaw Poland

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  • Waszczuk Joanna

    (Collegium of Business Administration, Warsaw School of Economics, al. Nlepodległoścl 162, 02-554 Warszawa, Poland.)

Abstract

Most property valuation research concerns entire properties consisting of land and structures. However, different features of land and capital as factors of production determine different patterns shaping their value and their different impact on the total price of real estate. In this article the hedonic decomposition model, which controls for differences in housing quality, is applied to decompose the price of an apartment into the land and structure components. The depreciation rate of housing was calculated and taken into account to properly isolate the dynamics of land over time. This allowed us to compare the house price index with the dynamics of land and structure. The empirical analysis was carried out on the data for the city of Warsaw.

Suggested Citation

  • Waszczuk Joanna, 2023. "A Decomposition approach for Assessing Land Leverage and Depreciation Rate on the Real Estate Market – Evidence from Warsaw Poland," Real Estate Management and Valuation, Sciendo, vol. 31(1), pages 55-68, March.
    • Handle: RePEc:vrs:remava:v:31:y:2023:i:1:p:55-68:n:3
    DOI: 10.2478/remav-2023-0006
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    References listed on IDEAS

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    1. Stephen Malpezzi & Larry Ozanne & Thomas G. Thibodeau, 1987. "Microeconomic Estimates of Housing Depreciation," Land Economics, University of Wisconsin Press, vol. 63(4), pages 372-385.
    2. Raphael W. Bostic & Stanley D. Longhofer & Christian L. Redfearn, 2007. "Land Leverage: Decomposing Home Price Dynamics," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 35(2), pages 183-208, June.
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    More about this item

    Keywords

    decomposition hedonic model; housing market; land leverage; depreciation rate;
    All these keywords.

    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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