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Hedonic price models for Madrid City vs Suburbs

By: Celia Moreno. UC3M. 2022

Tuesday 12 December 2023, by Carlos San Juan

One of the characteristics of the housing market is heterogeneity; to know which features most affect the rental price, appropriate research must be developed. Madrid is considered a very demanded, polycentric city for being the capital of Spain. This is why an analysis of the main characteristics that fix the rental price in the areas of Madrid City and South Madrid has been carried out using a Hedonic price model. A total amount of 3.069 cross-sectional data from early 2022 has been collected. In the estimations OLS, 2SLS and GMM have been used to correct endogeneity problems. Landlords and tenants can use this approach to establish the rental price of their homes based on the variables that most affect them. According to the existing literature, no previous investigations cover the data collection period and areas treated in this analysis. Results of the models show that the same house located in the South is consistently cheaper than in the City. The university core has a more significant price increase when having one more bathroom or pool in the dwelling compared to the non-university areas. Key Words: Rental Price, Housing, Hedonic price model, Madrid, University area.

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