A framework for analysing house prices using time, space and quality criteria

An increasing number of theoretical and empirical studies have dealt with the determinants of house prices over the last several decades. The hedonic price method (HPM) is undoubtedly one of the most popular and most used methods employed in these studies. Most early hedonic models of house prices typically included several structural characteristics of housing units as exogenous variables. Subsequently, spatial hedonic models emerged with the widespread use of locational and neighbourhood concepts in urban economics. Hedonic models were further expanded recently to include temporal dimension as a result of increasing number of panel applications in real estate and urban economics literature. The extended model which is known as the spatial panel model takes into account both spatial and temporal dynamics of house prices. The purpose of this paper is to combine structural characteristics of houses along with spatial and temporal aspects within a single analytical framework, and put forward an alternative framework to the spatial panel models.