Analyzing Buyers' Preferences in Lisbon Real Estate Housing Market
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Analyzing buyers’ preferences in Lisbon real estate housing market Parish of Estrela, Campo de Ourique, Santo António, Misericórdia, Santa Maria Maior, Alvalade, Areeiro e Avenidas Novas Maria Rebelo Monteiro Dissertation to obtain the master’s degree [email protected] Civil Engineering May 2019 Instituto Superior Técnico ABSTRACT Keywords: After a period of economic crisis, with the recovery of economic activity and the fact that Lisbon has become a destination for real estate investment from foreigners, the real estate Real estate market market is in a phase of accelerated growth. Attributes As not much is known about the attributes that influence the transaction value of the property, Lisbon Transaction Value this study intends to identify these attributes and quantify the weight of its influence in that same value. For this purpose, a characterization of the case study was first carried out and then a statistical analysis was developed based on five methods: One-Way ANOVA, Linear Regression, Nonlinear Regression, Generalized Linear Models and Neural Network using the software SPSS Statistic. This study was developed using a database with the registration of the normalized transaction values of properties sold in the last 10 years in Lisbon (2008- 2017). It was concluded that for zone 5-Estrela and Campo de Ourique and for zone 6–Centro Histórico, similar results were obtained and the following attributes were identified as having influence on the transaction value of the property: area, the buyer, whether the property was abandoned at the time of purchase, condition of the property and typology. The condition of the building in zone 5 and the onus in zone 6, were also identified as influential. Whereas for zone 7–Avenidas Novas the following attributes were identified: condition of the property, year of construction and parish. At the end of this study, expectations were confirmed regarding market behavior in the different zones. 1. INTRODUCTION policies. As long-term investments, uncertainty and The choice of this theme is because the real estate risk tend to be higher. This raises the need to evaluate market in Lisbon is in a phase of accelerated growth. the real estate property and give it a value. The value After a period of economic crisis where many families of a good in accordance with the International postponed the decision to buy a home, with the Valuation Standards Committee (IVSC) (2007) is: recovery of economic activity and the maintenance of “Market value is the estimated amount for which an interest rates at historical lows, with improvements in asset should exchange on the date of appraisal access to housing credit, and the fact that Lisbon has between a willing buyer and a willing seller in an arm’s become a destination for foreign real estate length transaction after proper marketing wherein the investment, that saw an opportunity in the Program parties had each acted knowledgeably, prudently and "Residentes não habituais" and Golden Visa. Added without compulsion.” to this context of economic optimism was a strong The value of a property in the market is influenced by demand for properties for placement in the rental a set of attributes that can be divided into three market motivated by tourism, and for first-house rental categories [1], [2]: i) physical attributes; ii) location with the change of the local accommodation law and attributes; e iii) neighborhood attributes. The physical the rental law, thus creating a perfect storm, a boom attributes refer to the property itself and describe the of the real estate market. physical characteristics of the property, such as for LITERATURE REVIEW example, the number of rooms, the area of the A market is a system where buyers and sellers come property and whether it has a fireplace. The location together to trade goods and services through pricing attributes describe the geographical characteristics of mechanisms. The real estate market has specific the property, such as the distance to different types of characteristics that are very different from other public transports and the distance to the city center. economic sectors, since it mobilizes large capital for Neighborhood attributes are the most difficult to each unit. The exploitation cycle is long and with high quantify, since these attributes describe the influence costs of operation and maintenance beside the fact of surrounding areas on the value of property, such as that a real estate property is a unique good, hardly for example, the quality of schools and the crime rate divisible and subject to administrative or political [3]. 1 The area of the property is referenced in the studies in transport does not influence the value [19]. In Seoul, two ways: directly by using its absolute value or the distance to the subway is insignificant for the value indirectly by using the value per square meter. The use of the property, since Seoul has a very developed of the value per square meter makes it possible to metropolitan network that covers practically the whole compare properties of different areas and thus to city [20]. In Amsterdam, Rotterdam and Enschede, not study the influence of other attributes that would be only the influence of distance to the nearest train diluted if the area was studied as an attribute. When it station was studied but also the distance to the most appears as an attribute it is the parameter that most frequently chosen train station in the area where the influences the value of the property [2], [4]. In most property is located. It was concluded that the second studies, the area positively influences the value of the influences more the value of the property [21]. property [5]. Besides the area of the property, the lot The view is an attribute that depends on the location area values the property with its effect on the value of of the property, and it is an attribute that in most the property studied in several cities as in Orem and studies values the property but which can also devalue Provo, Utah [6] or in Charlotte, North Carolina [7]. it depending on the type of view. Regarding the age of the property, it is one of the The neighborhood attributes are the most difficult to attributes that most studies point to as one of the quantify and aim at characterizing the neighborhood factors that most influence the value of the property. where the property is located, since these factors also This characteristic generally negatively affects the influence the value of the property. value, meaning that the buyer is willing to pay more for Several authors present a classification for these a newer property [3], [8]–[11]. attributes, dividing them into three categories [2]: Another attribute that influences the value of the socio-economic variables that characterize neighbors, property is the floor in which it is located. If the building such as average income and literacy; variables that has an elevator the higher the floor is, the more it is measure the quality of public services such as schools valued [12]. The number of rooms is another feature and hospitals; externalities such as crime rate, air of the property that most articles point to as one of the quality and noise pollution. factors that most influence the value of the property The average income of the neighborhood, is an [4]. As one additional room implies a larger area of the attribute that according to a study carried out in property, this attribute has a positive impact on the Istanbul, influences the value of the property. The value of the property [13]. As the number of rooms, the higher the average income of the neighborhood is the number of bathrooms, is also a variable that most higher is the value of the property [22]. studies indicate as one of the variables that most Literacy is another socioeconomic attribute that influence the value of the property [6]. Several studies influences the value of a property, for example, in in different cities of the world such as, Milwaukee, Roanoke, Virginia a higher percentage of population Wisconsin [8], in Douglas County, Nebraska [14], in with higher level of education values the property [23]. Charlotte, North Carolina [7] and in Istanbul [13] come The quality of schools in the vicinity of the property is to the conclusion that the number of bathrooms has a an attribute that increases its value [3], [24]. It is positive effect on the value of the property. concluded that the proximity to a school, positively A property having a garage is an attribute that influences the value of the property especially in positively influences its value [6], [10]. A building disadvantaged neighborhoods where the proximity having an elevator values the property, for example in has a greater influence than the quality of schools [20]. Athens, the lack of an elevator in the building In relation to the proximity to a hospital, a study carried devaluates the property by 11 176 € [10]. out in Seoul, concludes that it devalues the property, One of the main factors to evaluate the location of a as this proximity is not desirable due to the congestion property is its distance from the city center, and the caused by the noise of ambulance sirens and also due greater the distance is, the greater the devaluation of to superstitions [25]. the property [15]. Criminality, for example, the rate of home burglaries, Accessibility to public transport is an important has a negative effect on the value of the property, and determinant of the value of the property and can be buyers of the higher quality range give slightly more quantified through the availability of transport, cost, importance to this attribute than buyers of real estate travel time and transportation convenience [16].