Estimating Distance Gradients for Apartment Properties

Abstract

The effect of distance from the city centre on selling price, tax assessment and gross income is investigated for income property in proximity to the city centre. Hedonic estimation with a multiplicative model speci cation is used to estimate the relationship between property characteristics on the one hand and price, assessment and income on the other. The sample consists of centrally located apartment buildings in downtown Stockholm sold during a recent three-year period. The application is speci c to Stockholm, but the methodology and the insights gained are general. The results include the estimation of price gradients for the dependent variables. The models are used for estimating the implicit capitalisation rates in the property market as a function of the distance to the centre. We also estimated where the market appears to place the city centre as implied by the observations. Although no rent gradient was found, we were able to detect a signi cant negative price gradient. The former is reasonable considering the rent control ordinances. The latter indicates the existence of a negative land rent gradient.

The effect of accessibility on retail rents: testing integration value as a measure of geographic location

“…In the first version, Distance was calculated assuming that Sergels Torg, commonly viewed as the centre of Stockholm, is the city centre for retail services. In their study of distance gradients, Söderberg and Janssen (2001) also assume that Sergels Torg is the city centre.…”

“…the monocentric model predicts a (negative) exponential land rent function (Anas et al, 1998). The exponential function is also common in empirical studies (Söderberg & Janssen, 2001) and studies that investigate rent in polycentric areas also commonly use some generalisation of the exponential function (Anas et al, 1998) functional form, translog, is employed for the integration value. The model has the following form:…”

Directional Land Value Gradients

“…On the other hand, if gradients are variable (e.g., some large, some small, perhaps some with a positive sign), it might be reasonable that a gradient that is constrained to be constant with regard to directionality might be rather small. Soderberg and Janssen (2001) attempted to measure distance gradient for apartment properties. In their analysis, they used dummy variables to represent different sectors, thereby allowing the gradient to differ by sector.…”

Cap Rate as the Interpretative Variable of the Urban Real Estate Capital Asset: A Comparison of Different Sub-Market Definitions in Palermo, Italy

“…according to the accessibility and interaction principles and to the differential rent theory [16,50]. The city is a complex system arising from an autopoietic process [51][52][53], which causes continuous economic, cultural, and symbolic stratifications and modifications-over and above the physical and material ones.…”