Bourassa, Steven C.; Hoesli, Martin. (2022). Hedonic, Residual, and Matching Methods for Residential Land Valuation. Journal Of Housing Economics, 58.
Abstract
• Our first method involves a hedonic model estimated for sales of vacant lots. • Another method depreciates improvements, obtaining land value as a residual. • Our third approach matches the sales of vacant and subsequently developed lots. • This allows us to estimate a hedonic model of land leverage (the ratio of land to total property value) for improved properties. • We conclude that the third approach is the most promising of the three methods. Accurate estimates of land values on a property-by-property basis are an important requirement for the effective implementation of land-based property taxes. We compare hedonic, residual, and matching techniques for mass appraisal of residential land values, using data from Maricopa County, Arizona. The first method involves a hedonic valuation model estimated for transactions of vacant lots. The second approach subtracts the depreciated cost of improvements from the value of improved properties to obtain land value as a residual. The third approach matches the sales of vacant lots with subsequent sales of the same properties once they have been developed. For each pair, we use a land price index to inflate the land price to the time of the improved property transaction and then calculate land leverage (the ratio of land to total property value). A hedonic model is estimated and used to predict land leverage for all improved properties. We conclude that the matching approach is the most promising of the methods considered. [ABSTRACT FROM AUTHOR]; Copyright of Journal of Housing Economics is the property of Academic Press Inc. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)
Keywords
Hedonic Method; Land Leverage; Land Valuation; Matching Approach; Residual Approach