Housing Market in Malaga: An Application of the Hedonic Methodology

Abstract

The aim of this work is to analyze the factors shaping the price of private housing in Spain,
concretely in the capital of the “Costa del Sol”, using hedonic methodology. The results obtained
enable us to both identify those housing attributes that most influence price and quantify their
impact in monetary terms. We found that some structural attributes (e.g., surface area, number
of bathrooms, private parking or poor natural light) and certain location attributes (proximity to
the seaside or town center and location within a given district) have a determinant effect on the
price of dwellings. Furthermore, we found that two characteristics (surface area and number of
bathrooms) although show a positive contribution to the price, it is so at a diminishing rate.
These results are used to form appropriated valuations of attributes of residential house in
Malaga.

Key words: housing prices, hedonic methodology, implicit price, spatial attributes

Introduction

For many different reasons the importance of the housing market has led to an increase
in research interest regarding specific house attributes.

From the supply standpoint, the housing market has recently consolidated itself as one
of the main driving forces of economic activity in Spain. According to the Spanish National
Accounts figures, the weight of construction sector within national production figures has
increased in real terms from 4.47% to 5.59% of the total Gross Value Added in the period 1995-
2003.

From the perspective of investment, housing is the main asset of Spanish families, and
most of their savings are channeled towards this investment. Thus, according to the Spanish
Census of Population and Housing (2001), the percentage of owner-occupied housing in Spain,
Andalusia, and Malaga in relation to the housing stock is 80.94%, 81.68%, and 81.66%
respectively.

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