The Application Of Hedonic Price Method In Real Estate Price Index Construction

With the development of real estate markets, the risk of this industry has become an urgent problem. It is very important to give a price index of real estate market in virtue of scientific method. Real estate price index is a relative quantitative indicator that reflects changes of the price in real estate market in different period. The price index reflects the changes of price caused by supply and demand of the market and purchasing power of the currency.Nowadays, price indexes of real estate market published in China are generally based on the method of mean, which ignore the changes of price caused by quality of the property. These price indexes assume that real estate with the same quality, such as with the same numbers of rooms and so on. Actually, the assumption does not exist. Therefore, these price indexes are not efficient.Hedonic price theory is an important theoretical basis in foreign real estate price index. The theory solves the problem coursed by different quality of real estate. By constructing a model, it can get rid off the changes of price that caused by quality of the property. So this method is more efficient than the method of mean.Different methods of price indexes of real estate are compared and analyzed in this paper. Determinants are also studied. And a price index of real estate market is constructed based on hedonic theory. The price index provides a scientific indicator of real estate market in Jinan to help users make decision.There are three innovations in this paper. First, this paper uses 752 data in JiNan to construct real estate price index. By establishing a multiple regression model, this paper analyzes influence factors of the price of real estate. This is seldom studied in domestic literature. Second, this paper classes 752 data to 6 regions by cluster analysis, and then adds region factors as dummy variables to hedonic price model, studying the different influence of determinants in different area. Third, comparing different method in the empirical research is seldom referred in domestic studies.From the empirical research, we can realize that pooling data index method is more efficient than cross-section index method based on data of this paper. And the influence of quantitative variables is bigger than the influence of dummy variables. Furthermore, the personnel and supervisors can realize the difference between Chinese and international methods in constructing real estate price index system, and ascertain the long development goal of Chinese future real estate price index system.