Another macroeconomic factor that justifies research interest in this sector is the
increasing weight of new dwelling purchases in the Gross Fixed Capital Formation during the
last decade. This has increased from 20.34% to 22.62% in 2003, and confirms the significance
of this asset as a destination of household savings.
From the standpoint of expenditures, and according to the information provided by the
Spanish Central Bank (Banco de Espana), the percentage of mean annual wages used per
worker during the first year of a mortgage to pay for the purchase of their house has risen from
36.6% in 1996 to 51.4% in 2003.
From this data we can infer that in the last decade one of the main problems in the
Spanish housing market has been the difficulty for most of the population to have purchase a
house due to high prices.
Taking the period 1996-2003 as a reference as well as the price per square meter
estimated by the Spanish Ministry of Public Works (Ministerio de Fomento), there has been a
trend toward higher prices for new dwellings. Thus, at the end of 1996, the mean price per
square meter of a deregulated dwelling was 674.32 €, and in 2003 this reached 1428.16 €, a
growth of 112%. The increase is similar for Andalusia as a whole but within this region the
growth of the Malaga market is higher. Thus, the price per square meter of dwellings in Malaga
city increased by 157% during the same period, i.e., from 581.65 €/m2 to 1494.22 €/m2. These
figures show the significance of this market in the area.
In this paper, we analyze house pricing using hedonic methods to study the influence of
house attributes on final house prices.
An Overview on the hedonic methodology
The existence of products differentiated by specific attributes is the main reason for the
emergence of the hedonic price model. During the first decades of the 20th century some
papers were published analyzing the price of a given good by studying variations in the quality
of the product as established by the product’s attributes [See Haas (1922), Wallace (1926),
Waught (1928 and 1929) and Court (1939)].