Market Efficiency, Uncertainty And Risk Management in Real Estate Valuation – How Hedonics May Help

The 2007-2008 subprime mortgage crisis has profoundly modified the way investment and management risks are perceived by economic agents. In particular, both private and institutional players in the property sector are now being compelled to follow more stringent rules and to display greater transparency in their management of risk issues and of lending practices. In that context, analytical tools based on statistics and econometric modelling are increasingly resorted to as risk-containment devices. The purpose of the paper is to look at how real estate appraisal practitioners and related professionals may benefit from a greater recourse to statistics and, more precisely, to econometric modelling, in their search for market value. As brought out in the real estate literature, the very definition of market value lends itself to a statistical approach, the latter reaching its full meaning with the hedonic price (HP) method which is shown to be an extension of the traditional sales comparison approach

Landscaping and House Values: An Empirical Investigation

This article is the winner of the Real Estate Valuation manuscript prize (sponsored by The Appraisal Institute) presented at the 2001 American Real Estate Society Annual Meeting. This hedonic study investigates the effect of landscaping on house values, based on a detailed field survey of 760 single-family homes sold between 1993 and 2000 on the territory of the Quebec Urban Community. Environmental information includes thirty-one landscaping attributes of both houses and their immediate environment. By and large, a positive tree cover differential between the property and its immediate neighborhood, provided it is not excessive, translates into a higher house value. Findings also suggest that the positive price impact of a good tree cover in the visible surroundings is all the more enhanced in areas with a high proportion of retired persons. Finally, a high percentage of lawn cover as well as features such as flower arrangements, rock plants, the presence of a hedge, etc. all command a substantial market premium.

Homeworking, telecommuting and journey to workplaces - Are differences among genders and professions varying over space?

The aim of this paper is to assess differences on homeworking and teleworking behaviour among genders considering age groups, professional statuses, household structures and car access. The analysis is based on a sample of more than 30,000 workers responding to the 2001 origin-destination (O-D) survey data in Quebec City (Canada). Moreover, this paper puts specific emphasis on linking those differences in behaviour to the location of workplaces related to living places of the respondents. During the O-D survey, every worker was asked to disclose the frequency of homeworking and teleworking he/she was experiencing during the preceding weeks. Answers were later aggregated into six categories: never working at home (88.4% of respondents), working at home 1 day per two weeks or less (4.8%), 1 day per week (1.7%), 2 or 3 days per week (1.2%), 4 days or more per week (0.7%), always working at home (3.2% – homeworkers). However, those patterns show significant differences among genders (higher proportion of females are working entirely at home; higher proportion of males are occasionally working at home), age groups (younger workers seldom work at home and the proportion of teleworker increases with age – about 16% among the 55-64 years old and 27% among the elderly) and professional status (proportion of teleworkers is strongly related to qualifications and decisional status of the person, yielding higher levels of teleworking for managers, self-employed persons, professors and lawyers than for office clerks, technicians and non-qualified workers). This last relationship is very strong suggesting that job empowerment (especially ability to control time schedule) is of paramount importance for the development of teleworking. However, having higher family constraints, lone parents are seeking more flexibility on their work agenda: 12% are experiencing some level of teleworking on top of 3% of them which are homeworkers. Again, the difference appears more significant among male than among female workers, suggesting again a better control of the first group on their work schedule. Moreover, owning a driver license or holding a bus pass does not have the expected effect on teleworking: car drivers are working at home more frequently than other people; conversely 92% of bus users are going to their work place every weekday, leaving a mere 8% to teleworking and homeworking. Significant differences appear when considering workplaces and home locations within the city. People working near the city centre are more willing than others to consider teleworking, people living in the suburban areas show higher levels of homeworking. Finally, significant differences of travel time from home to work were found among various categories of teleworkers and homeworkers. Preliminary results suggest that the development of teleworking could be highly rooted to labour market and household structures as well as to the urban form. Urban sprawl is probably impeding development of teleworking, at least for Quebec City.

Les découpages administratifs sont-ils pertinents en analyse immobilière? Le cas de Québec

La ville de Québec offre une mosaïque d’espaces de vie qui correspondent à autant de sous-marchés résidentiels. Quatre cent ans d’histoire ont produit une agglomération diversifiée, depuis sa fondation en 1608. Toutefois, on peut remettre en question la pertinence des découpages administratifs pour réaliser des études urbaines. S’il n’y a pas de découpage spatial idéal, des approches permettent néanmoins de délimiter des ensembles géographiques relativement homogènes, eu égard à une problématique donnée. Cet article présente une segmentation spatiale du territoire, basée sur des critères historiques, sociologiques et morphologiques, comme alternative aux partitions administratives pour réaliser des études du marché résidentiel. Des analyses discriminantes ont permis de comparer la performance de trois découpages : celui proposé – l’historico-morphologique (HM) et deux administratifs, celui avant et celui après les fusions municipales. L’étude porte sur le marché unifamilial de Québec et utilise des données multidimensionnelles. Enfin, les trois découpages sont intégrés dans des modèles de prix hédoniques afin de tester leur pertinence pour mesurer les variations des prix implicites. Les résultats suggèrent que la partition HM est plus efficace que les découpages administratifs, tout en étant perfectible.Quebec City is a patchwork of living spaces matched by a corresponding number of residential sub-markets. Four hundred years of history have spawned a diversified milieu since the city’s foundation, in 1608. However, questions have been raised about the appropriateness of administrative segmentation in urban studies. No such thing as an ideal form spatial segmentation exists, but there are approaches that allow the demarcation of fairly homogeneous geographical entities and which can be adapted to given situations. This study presents an historical and morphological (HM) view of spatial segmentation based on historical, sociological and morphological criteria and which stands as an alternative to the usual administrative partitioning typical of residential market studies. Discriminant analyses were used to test the viability of three kinds of segmentation : one, historical and morphological – the approach advocated here – and the other two, administrative, before and after the municipal mergers. In particular, our study, which uses multivariate data and statistics, is focussed on the Quebec City single-family residential market. Finally, the three types of segmentation are integrated into hedonic pricing models and used to measure the extent of their influence on variations in implicit sale prices. Our findings suggest that HM segmentation, though not perfect, is nonetheless more viable than administrative demarcation.La ciudad de Quebec ofrece tantos mosaicos de espacios de vida como sub-mercados residenciales. Desde su fundación en el año 1608, cuatrocientos años de historia han producido una aglomeración diversificada. Sin embargo, con el fin de realizar estudios urbanos se puede cuestionar la pertinencia de las delimitaciones administrativas. Bien que no exista una delimitación espacial ideal, ciertas aproximaciones permitirán de delimitar conjuntos geográficos relativamente homogéneos según una problemática dada. Este artículo presenta una segmentación espacial del territorio según criterios históricos, sociológicos y morfológicos, como alternativa a delimitaciones administrativas, para realizar estudios de mercado residencial. Análisis discriminantes han permitido comparar el funcionamiento de tres divisiones : el histórico morfológico (HM) propuesto, más dos administrativos, uno anterior y otro posterior a las fusiones municipales. El presente estudio trata del mercado unifamiliar de la ciudad de Quebec utilizando datos multidimensionales. Finalmente, las tres divisiones se integran en modelos « hedónicos » de precios, para así medir las variaciones de los precios implícitos. Los resultados sugieren que la partición HM es más eficaz que las divisiones administrativas, siendo estas perfectibles

Measuring and interpreting urban externalities in real-estate data : a Spatio-Temporal Difference-in-Differences (STDID) estimator

It is now almost impossible to deal with spatial data without considering some explicit specification that captures possible spatial effects. One valuable feature of spatial econometrics models is their decomposition of marginal effects into spatial spillover effect and spatial externalities. Progress in interpreting spatial econometrics models has now been extended to the spatial-panel case. However, little consideration has been given to the possible interpretation of models using spatial data pooled over time. This paper proposes a spatio-temporal difference-in-differences (STDID) estimator to measure the effect of urban externalities, such as transport infrastructures, as revealed through real-estate prices. Based on an empirical application for a new development of commuter trains in the Montreal suburbs, this paper shows how such propositions can help us to better understand and evaluate changes in mass transit systems

The pricing of embedded lease options

Office leases are generally agreed upon for extended terms, with possible options to leave or to renew in favor of the tenant. Tenants who have no options during the life of their lease expect to pay a lower rent than those who do. In this letter, we built up a conceptual framework based on binomial tree for the pricing of options embedded in a lease contract. Results show that lease options are dependent upon market rents volatility

Formes commerciales et mobilité à Québec : quelle organisation spatiale ?

La ville de Québec est entrée de plain-pied dans la société de consommation au cours de la deuxième moitié du XXe siècle. Ceci s’est d’abord traduit par l’apparition de centres commerciaux dans les banlieues proches. Ce nouveau type de lieu de consommation, associé à l’usage de la voiture privée, s’ajoute alors aux rues commerciales structurant les quartiers urbains et les noyaux villageois qui composent la trame plus ancienne du peuplement. Par la suite, toute une hiérarchie de centres commerciaux se développe et, vers la fin du siècle, les magasins-entrepôts font leur apparition. Dans quelle mesure ces diverses formes commerciales sont-elles associées à des pratiques urbaines différentes ? Il est facile d’imaginer une opposition binaire entre un genre de vie urbain qui est le fait de ménages vivant à proximité des rues commerciales, dans les corridors du Métrobus par exemple, et un genre de vie de banlieue pratiqué par des ménages vivant dans l’univers des autoroutes, des grands centres commerciaux et des magasins-entrepôts. Il s’agit d’apprécier à quel point cette dualité est imaginaire ou réelle. À l’aide de données détaillées sur la localisation des commerces et la mobilité des personnes, nous explorons les rapports entre les formes commerciales et les déplacements de consommation des résidents de la région métropolitaine de Québec.Quebec City fully joined the consumer society in the second half of the twentieth century. Shopping centers first appeared in the near suburbs. Linked to the use of cars, they of-fered strong competition for older commercial streets found in central neighbourhoods and in the small towns and villages gradually surrounded by suburban expansion. A multilevel hierarchy of shopping centers developed over the years, with so-called “big boxes” being the most recent addition. To what extent are these diverse commercial forms associated with different urban practices, including mobility behaviour? It is easy to imagine, on the one hand, an urban mode of living associated with commercial streets and experienced by persons living, for example, in the Métrobus corridors, and on the other, a suburban mode of living common to persons living in sprawling bungalow areas, driving on freeways and shopping in big boxes. To what extent is this duality real? Using detailed data on shop location and daily weekday mobility, we explore the spatial organization of the Quebec City metropolitan area, and suggest that well designed corridors of urban expansion may have virtues with regards to sustainable urban development