INTERNATIONAL REAL ESTATE REVIEW国际房地产评论.pdfVIP

Hierarchical Bayesian Approach 1 INTERNATIONAL REAL ESTATE REVIEW 2010 Vol. 13 No.1: pp. 1 – 29 A Hierarchical Bayesian Approach for Residential Property Valuation:Application to Hong Kong Housing Market Sam K. Hui∗ Stern School of Business of New York University; Email: khui@ Alvin Cheung Massachusetts Institute of Technology Jimmy Pang Stanford Artificial Intelligence Laboratory, Stanford University We have developed a statistical method for the valuation of residential properties using a hierarchical Bayesian approach, which takes into consideration the unique structure of the Hong Kong property market. Our model is calibrated on a dataset that covers all residential real estate transactions in ten major Hong Kong residential complexes from February 2008 to February 2009. Although parsimonious, our model outperforms other valuation methods that are based on average price- per-square-feet or expert assessments. By providing our model-based valuations online without charge, we hope to improve transparency in the Hong Kong housing market, thus enabling consumers to make better investment decisions. ∗ Correspondence author 2 Hui, Cheung and Pang 1. Introduction Property valuation is an important issue for consumers, real estate investors, and the banking industry. For consumers and real estate investors, accurate assessments of residential real estate property values are crucial for financial planning and making investment decisions. For banks, there is a need to value residential properties accurately in order to make optimal lending decisions (e.g., evaluating the size of the mortgage as a percentage of the property value that the bank is willing to offer)