Estimation of the Housing Expenditure Function Based on Housing Characteristics for Urban Households in Tehran

Abstract

Accurate prediction of housing prices is of great importance for homeowners, investors, tax assessors, and other participants in the real estate market. Therefore, the availability of a reliable pricing model helps bridge existing information gaps and, consequently, improves the efficiency of the real estate market.

This study estimates the hedonic rental price model and the household housing expenditure function. In addition, it examines the factors affecting housing prices and expenditures while evaluating the predictive performance of the proposed model. The findings indicate that the estimated coefficients of most explanatory variables are consistent with the theoretical foundations of the subject.

Among the physical characteristics of housing, larger floor area, a greater number of rooms, the type of building structure, and the availability of piped natural gas and a telephone line have significant positive effects on housing rents and property values. Furthermore, the structural variable of household size (i.e., a larger number of household members) also leads to higher housing rents and property values. Although the presence of central heating and heating and cooling systems exhibits a positive relationship with housing prices, these variables are not statistically significant.