Testing Housing Price Drivers in Santiago de Chile: A Hedonic Price Approach

Hedonic modelling is an empirical analysis technique that is widely used to review the housing market and unpack the main determinants of price. A correct determination of housing price drivers allows a weighted prediction of the value of each dwelling for sale or rent. This paper reviews the fundamental determinants of housing prices that have been published in the literature to see which ones have a better predictive fit for the case of the housing market in the city of Santiago, Chile. From a record of 456,000 property transactions, a dataset composed of 11 explanatory variables is elaborated. Through a semi-logarithmic regression, 4 variables that contribute to explaining the formation of housing prices in Santiago, Chile, are identified. The results indicate that the socioeconomic characterisation of urban areas where housing is traded, the price of copper on the London Metal Exchange, the mortgage interest rate, the age of residential buildings are the main drivers for the main drivers of prices in Santiago. Given the crisis of access to housing in Chile, the article provides relevant information for decision-makers in housing policy.

145 views

References

Arias-Loyola, M. 2021. ‘Evade neoliberalism’s turnstiles! Lessons from the Chilean Estallido Social.’ Environment and Planning A: Economy and Space 53 (4): 599–606. https://doi.org/10.1177/0308518X21997832

Case, K. E., R. J. Shiller 1990. ‘Forecasting Prices and Excess Returns in the Housing Market.’ Real Estate Economics 18 (3): 253–273. https://doi.org/10.1111/1540-6229.00521

Cohen, J. P., Y. M. Ioannides, W. W. Thanapisitikul 2016. ‘Spatial effects and house price dynamics in the USA.’ Journal of Housing Economics 31 (March 2016): 1-13. https://doi.org/10.1016/j.jhe.2015.10.006

Cohen, J. P., J. Zabel 2020. ‘Local House Price Diffusion.’ Real Estate Economics 48 (3): 710-743. https://doi.org/10.1111/1540-6229.12241

Encinas, F., C. Aguirre, R. Truffello, R. Hidalgo 2019. ‘Speculation, land rent and the neoliberal city. Or why the free market is not enough?’ ARQ (102): 120-133. https://doi.org/10.4067/S0717-69962019000200120

Evans, A. W. 1985. Urban Economics: An Introduction (1st ed.). Oxford: Blackwell Publishers Ltd.

Fernandez, R., M. B. Aalbers 2016. ‘Financialization and housing: Between globalization and Varieties of Capitalism.’ Competition & Change 20 (2): 71-88. https://doi.org/10.1177/1024529415623916

Figueroa, E., G. Lever 1992. ‘Determinantes del precio de la vivienda en Santiago: Una estimación hedónica.’ Estudios de Economía 19 (1): 67–84. https://repositorio.uchile.cl/handle/2250/128244

Fujita, M., P. Krugman, A. J. Venables 2000. ‘The Spatial Economy: Cities, Regions, and International Trade.’ Southern Economic Journal 67 (2): 491-493. https://doi.org/10.2307/1061487

Gross, P. 1990. ‘Santiago de Chile: Ideologías y modelos urbanos.’ Revista EURE-Revista de Estudios Urbano Regionales 16 (48): 67–85. https://www.eure.cl/index.php/eure/article/view/1026

George, D., M. Mallery 2010. SPSS for Windows Step by Step: A Simple Guide and Reference, 17.0 Update, 10th Edition. Boston: Pearson.

Gujarati, D. N. 2022. Essentials of econometrics (Fifth edition). Los Angeles: SAGE.

Idrovo-Aguirre, B. J., J. E. Contreras-Reyes 2021. ‘The Response of Housing Construction to a Copper Price Shock in Chile (2009–2020).’ Economies 9 (3): 98. https://doi.org/10.3390/economies9030098

Iturra, V., D. Paredes 2014. ‘Construction of a spatial housing price index by estimating an almost ideal demand system.’ Tijdschrift voor Economische en Sociale Geografie 105 (3): 301–314. https://doi.org/10.1111/tesg.12067

Krugman, P., R. Wells, K. Graddy 2013. Fundamentos de Economía. (Spanish Edition) Barcelona: Editorial Reverté.

Lefebvre, H. 1991. The Production of Space. Oxford: Blackwell.

Mayol, A. 2019. Big Bang: Estallido Social 2019 [Big Bang: Social Outburst 2019]. Santiago: Catalonia.

Micallef, B., R. Ellul, N. Debono 2021. ‘A hedonic assessment of the relative importance of structural, locational and neighbourhood factors on advertised rents in Malta.’ International Journal of Housing Markets and Analysis 15 (1): 203-230.  https://doi.org/10.1108/IJHMA-11-2020-0141

Parrado, E., P. Cox, M. Fuenzalida 2009. ‘Evolucion de los Precios de Viviendas en Chile [Evolution of Housing Prices in Chile].’ Economia Chilena 12 (1): 51-68. https://hdl.handle.net/20.500.12580/3513

Rodriguez Marin, J. C., P. F. D. Jaimes, T. B. Velasco 2017. ‘Determinantes del precio de la vivienda en Bucaramanga.’ Desarrollo 1 (30): 39-59. https://doi.org/10.19052/ed.3649

Taltavull de La Paz, P. 2003. ‘Determinants of housing prices in Spanish cities.’ Journal of Property Investment & Finance 21 (2): 109–135. https://doi.org/10.1108/14635780310469102

Quiroga, B. F. 2013. Hedonic Estimation with Unobserved Characteristics: An Application to the Housing Market in Santiago, Chile. https://doi.org/10.2139/ssrn.2356019

Rosen, S. 1974. ‘Hedonic prices and implicit markets: Product differentiation in pure competition.’ Journal of Political Economy 82 (1): 34–55. https://www.jstor.org/stable/1830899

Sagner, A. 2009. Determinantes del Precio de Viviendas en Chile., Working Papers N° 549, Central Bank of Chile. Retrieved June 2, 2023, from https://www.bcentral.cl/documents/33528/133326/DTBC_549.pdf/beb02802-bd72-9591-492c-8c30bac0d727?t=1690484413167

Silva, C. G., C. Vio 2015. ‘Los precios de vivienda y factores macroeconÓmicos: El caso de Chile [Housing prices and macroeconomic factors: evidence from Chile].’ Economia Chilena 18 (1): 4-24. https://hdl.handle.net/20.500.12580/3570

Smolka, M., F. Furtado 2001. Recuperación de plusvalías en América Latina. Cambridge: Lincoln Institute of Land Policy. Retrieved June 2, 2023, from https://www.lincolninst.edu/sites/default/files/pubfiles/recuperacion-de-plusvalias-en-america-latina-full.pdf

Su, C.-W., X.-Q. Wang, R. Tao, H.-L. Chang 2019. Does money supply drive housing prices in China? International Review of Economics & Finance 60 (March 2019): 85–94. https://doi.org/10.1016/j.iref.2018.12.013

Valdivia, D., D. Perez 2013. Dynamic Economic and Coordination on Fiscal-Monetary Policies in Latin America: Evaluation through a DSGE Model. Retrieved June 2, 2023, from https://doi.org/10.2139/ssrn.2324307

Vergara-Perucich, F., C. Aguirre-Núñez 2020a. ‘Urban capital gain recovery simulation for line 3 of the Santiago Metro.’ ACE: Architecture, City and Environment 14 (42): 8963. https://doi.org/10.5821/ace.14.42.8963

Vergara-Perucich, J. F., C. Aguirre-Nuñez 2020b. ‘Housing Prices in Unregulated Markets: Study on Verticalised Dwellings in Santiago de Chile.’ Buildings 10 (1): 6. https://doi.org/10.3390/buildings10010006

Vergara-Perucich, J. F. 2021. ‘Determinantes urbanos del precio de la vivienda en Chile: Una exploración estadística.’ Urbano 24 (43): 40–51. https://doi.org/10.22320/07183607.2021.24.43.04

Voltes-Dorta, A., A. Sánchez-Medina 2020. ‘Drivers of Airbnb prices according to property/room type, season and location: A regression approach.’ Journal of Hospitality and Tourism Management 45 (December 2020): 266–275. https://doi.org/10.1016/j.jhtm.2020.08.015

Wang, X.-Q., L.- N. Hao, R. Tao, C.-W. Su 2020. ‘Does money supply growth drive housing boom in China? A wavelet-based analysis.’ Journal of Housing and the Built Environment 35 (1): 125–141. https://doi.org/10.1007/s10901-019-09668-w

Zhang, Y., X. Hua, L. Zhao 2012. ‘Exploring determinants of housing prices: A case study of Chinese experience in 1999-2010.’ Economic Modelling 29 (6): 2349–2361. https://doi.org/10.1016/j.econmod.2012.06.025

Please, login first to add a comment.
Document Type
article
ISSN
2336-2839
Volume / Issue
10 / 2
Pages
44-57
Date of publication
26.10.2023

Cite this article

copy
Vergara-Perucich, F. 2023. ‘Testing Housing Price Drivers in Santiago de Chile: A Hedonic Price Approach.’ Critical Housing Analysis 10 (2): 44-57. https://doi.org/10.13060/23362839.2023.10.2.558