Hedonic model

Hedonic models are based on the definition of goods as a set of their various characteristics or attributes. The quality of real estate includes information on the physical structure, use and location of the properties.

On the basis of these property characteristics, it is also possible to estimate the prices of the properties through the corresponding characteristics. Similar to a shopping basket, the price of which is determined by its contents or the prices of the products it contains. The only difference is that the prices of the different properties of real estate cannot be observed individually.

The marginal or implicit prices can be determined using multiple regression, so that the hedonic equation best reproduces the price of each property. Using the implicit prices, the quality of the traded properties can then be assessed and a quality adjustment made.

The FSO uses the "Hedonic repricing" method.