A Hedonic Urban Land Price Index

Abstract

Urban development projects have many effects on society, such as improving mobility, health, education, and sustainability. For policy-relevant measures, it is important that policymakers are able to foresee how quality improvements influence the price of land. Therefore, our objective is to collect a set of variables able to account for the effects of a multitude of land quality improvements. In addition, surrounding plots and the natural and built environment might also influence urban land prices. However, most house price and land price indices do not control for any potentially related spatial effects. The urban land price index detailed here is based on land transaction prices for Luxembourg between 2010 and 2014 recorded in notarial deeds and cadastral data, together with geo-spatial characteristics. The proposed index includes many aspects in an initial hedonic model specification. After performing a spatial dependence test and identifying several spatial effects, the index also operates on a spatial model.