Consumption preferences and location effects: A hedonic analysis of the housing market in Cracow, Poland

This study aimed to investigate the dwelling-buyers' preferences; assess marginal values of improvements in structural, neighborhood and location characteristics and test the applicability of hedonic pricing method (HPM) in Poland. The econometric hedonic housing price model is developed and estimated for the Cracow urban area. Many forms of the hedonic price function can be used to describe the relationships between price and housing characteristics. To select the most appropriate model the goodness of fit test was performed. The Analysis and Monitoring of Real Estate Market Transactions (AMRON) database of Polish Banks Association containing data regarding mainly structural characteristics and transaction prices of real estate is used with observations between 2013 and 2014 years. The GIS technique is applied for implementation to the database neighborhood and location attributes. In the logarithmic model there are five significant variables: distance to the city center, distance to shopping center, total floor area, age of the building and garage or parking place. The findings are comparable with other studies and suggest that, as expected, the distance to the city center and to the shopping center is negatively correlated with housing price. Households are willing to pay more for apartments with garage or parking place, with larger floor area and situated in the building of younger age. Interestingly, however, whether surrounding area is potentially threatened by the flood or not is not a significant attribute. The findings could help to fine tune the developing housing market to match supply with demand in quality terms.