Real estate valuation based on hedonic price model

Traditional valuation approaches used by valuers in Kenya are highly dependent on \nsubjective judgment in the returned values. This has been cited as a major cause of value \nvariability and disparities among valuers. \nIn this study the traditional valuation methods mainly; Cost approach, Income approach \nand Market approach have been examined. Their strengths and weaknesses have been \nhighlighted. The study attempts to offer solution through application of Hedonic pricing \nmethod. \nThe advantage of using Hedonic pricing method is that it can model the relationship \nbetween sale price of a house and housing attributes. The hedonic pricing model \nregresses each attribute to show how change in each attribute affects the house price/ \nvalue. \nUsing hedonic the relative monetary contribution of each factor can be estimated. \nHaving knowledge on the contributory factor of each attribute enables the valuer to \nundertake valuation with accuracy and precision. \nThe procedure in application of hedonic involved first indentifying and listing the factors \nthat influence the value of a house. The mode of identification was through literature \nsearch, questionnaires and interviews conducted with selected valuation firms and \nproperty dealers who are involved in buying and selling of houses in the city of Nairobi. \nFrom these attributes, critical house value influencing variables were chosen after \nthorough statistical analysis