In South Africa various financial institutions and independent vendors have developed
residential property valuation models to estimate the current value of historically traded
properties. A natural extension to these models has been to develop historical property price
indices. In this dissertation, three of the four approaches to developing property price indices
will be examined. Through back–testing and other statistical methods, the most accurate and
robust approach will be determined. The four major approaches available are the mean
valuation per suburb, the median valuation per suburb, the repeat sales approach and
hedonic regression. The mean valuation per suburb approach can be biased because of
outliers in property prices. However, outliers in property prices will not influence the median
valuation per suburb approach, but in cases where property values in a suburb have a
skewed distribution, the valuation amount could be distorted. Neither of the above
mentioned shortcomings influences the repeat sales or the hedonic regression approach. To
follow the hedonic regression approach, the characteristics of the property need to be
known. In South Africa, however, the available property data lacks detailed characteristics of
traded properties. This dissertation will therefore focus on the first three methods. The repeat
sales approach measures the growth in property prices by applying a generalized linear
model to properties that have traded more than once. This approach is only possible if there
is a representative amount of repeat sales able to fit a model. The focus of this project will be
on the repeat sales approach, but all three the approaches discussed will be analysed to
prove that the repeat sales approach is the most accurate in developing a property price
index for properties in South Africa. / Thesis (M.Sc. (Risk Analysis))--North-West University, Potchefstroom Campus, 2011.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:nwu/oai:dspace.nwu.ac.za:10394/4565 |
| Date | January 2010 |
| Creators | Bester, Hermine |
| Publisher | North-West University |
| Source Sets | South African National ETD Portal |
| Detected Language | English |
| Type | Thesis |
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