The Use of Location Variables in a Mix-Adjusted Index for Dublin House Prices

The market for a particular house can be considered a local market. Once a potential house purchaser has made a decision about which price range is affordable the purchaser must then make a number of decisions regarding the property itself. These decisions include location, which particular neighbourhood or area, and then the specific house characteristics are being sought. So in the case of Dublin, the decision could be between North and South Dublin, then between Rathmines or Rathgar, Glasnevin or Drumcondra, and then what type of house i.e. a 3 bed semidetached with en-suite, garden and garage. Section 1 of this paper outlines why it is necessary to take account of the mix of property transactions in a period when measuring the change in price. In section 2 an overview is given of different location variables in the US and UK literature, illustrating the importance of location variables, broadly defined, in explaining house price change. The next section of the paper outlines the details of the dataset employed in the analysis. Section 4 will apply alternative approaches to the use of location to the Irish data. A summary of findings will be presented in section 5. The final section will draw some conclusions as well as indicating some areas of further research.