Housing Market Essay Example | Topics and Well Written Essays - 1500 words

Housing Market - Essay Example The dominant contingent valuation approach has been used for many years in the research field work in Europe and unfortunately, is very likely to continue its prevalence in the near future, too. 2. In the article Kartin Rehdanz, presents an interesting and problematic view about the climate change impact on British households. Her study is based on investigating the amenity value of climate on households in Great Britain. She applies the hedonic price approach, which traces the marginal willingness of individuals to pay for changes in the climate. 3. The article claims that climate should be regarded as amenity and thus prices for houses in geographical regions with more sunny days on average have to affect the property price. The study is unique, because it uses for the first time geographic information system to derive the data. In comparison with other researches done, this one is exceptional, because attention is paid to problems of endogeneity when applying the census tract date. Furthermore, various specifications of the climate variables are taken into consideration and at the end, the study conducts an analyses if British households will gain from the global warming. 4. One of the shortcomings of the study is that besides Maddison's empirical work in 2001, there are no other investigations made on the amenity value of climate. ... 5. The administrative boundaries create data limitations, which influence the final results and their interpretations. Thus, the evidence collected varies not only between different counties, but also within Great Britain. Roback (1982) first examined the effects of climate and how they affect both wages and the price of housing. Moreover, obtaining the required information and measures of local amenities, requires mainly distance evaluation. 6. A number of problems into this research also cause the two hedonic equations that have to be estimated. The regression analysis becomes too complicated as the two equations need to be determined. 7. All extensive data collection has to be taken from the specific local areas, which requires extra control of the variables on which the location choices are based. Therefore, the variables must be accurately chosen, to eliminate the variable biases, and to decrease the problems of multicollinearity. The further avoid difficulties in measurements, the proposal given in the articles divides Great Britain into smaller geographical areas, where the local amenities like the climate variables vary, but they are adjusted with the local housing market, because the labour market can not be modified (Englin, 1996). Gayer (2000) took an instrumental variable approach to a hedonic analysis. In his study he estimated a bi-causal relationship between house market prices and the environmental risk. 8. The starting point of all hedonic analysis if the presumption of equilibrium in hedonic markets - salary and rents are adjusted in such a way that people stay indifferent in what location they are living and working (Mler, 1977). Another problem is that