Modeling of the pricing process in the housing market by the methods of system dynamics

Authors

DOI:

https://doi.org/10.15587/2312-8372.2016.81473

Keywords:

real estate market, system dynamics, pricing, modeling, simulation, prediction

Abstract

The objects of the article are the pricing process in the housing market. Usually housing research uses a mix of statistical and econometric techniques, qualitative methods, large scale surveys, demographic forecasting and other modeling techniques. But now with increasing the rate of change of pricing factors statistical methods become ineffective.

In this paper we use methods of system dynamics to simulate housing pricing. The resulting model can be used to learn about relationship between the factors of housing market, and to predict it. For the housing market of Ukraine, such model is constructed for the first time.

The article proposes causal-loop models of housing pricing factors relationship, such as demand, supply, price and financial capabilities of buyers. Simulation model of housing pricing is proposed on this basis. The values of external factors model for Ukraine in 2000–2015 are found out. The effects of these factors on the housing price in Ukraine are analyzed.

Simulation experiment shows good agreement between the simulation results and the real housing price changes. Also, the model is successfully used to determine the estimated housing price in alternative evolution scenarios of this market.

Proposed simulation model allows pre-assessing the market response to changes in external factors which make it effective.

Author Biography

Алексей Юрьевич Минц, Priazovskyi State Technical University, str. Universitetskaya 7, Mariupol, 87500

Candidate of Economic Sciences, Associate Professor

Department of Finance and Banking

References

  1. Barnes, Y. (2016, January 28). What Price The World? Savills. Available: http://www.savills.co.uk/research_articles/188297/198669-0/
  2. Maisel, S. J., Burnham, J. B., Austin, J. S. (1971). The demand for housing. Review of Economics and Statistics, 53, 410–413.
  3. Polinsky, A. M., Ellwood, D. T. (1979). An empirical reconciliation of micro and group estimates of the demand for housing. Review of Economics and Statistics, 61, 199–205.
  4. De Leeuw, F. (1971). The demand for housing. A review of the cross-sectional evidence. Review of Economics and Statistics, 53 (1), 1–10.
  5. Fallis, G. (1985). Housing Economics. Toronto: Butterworth, 250. doi:10.1016/c2013-0-06307-4
  6. Brooks, C., Tsolacos, S. (2010). Real Estate Modeling And Forecasting. New York: Cambridge University Press, 453. doi:10.1017/cbo9780511814235
  7. Forrester, J. W. (1969). Urban Dynamics. Cambridge MA: MIT Press, 299.
  8. Cho, D., Ma, S. (2006). Dynamic Relationship between Housing Values and Interest Rates in the Korean Housing Market. The Journal of Real Estate Finance and Economics, Vol. 32, № 2, 169–184. doi:10.1007/s11146-006-6013-6
  9. Hwang, S.-J., Park, M.-S., Lee, H.-S., Yoon, Y.-S. (2010, January 31). Analysis of the Korean Real Estate Market and Boosting Policies Focusing on Mortgage Loans: Using System Dynamics. Korean Journal of Construction Engineering and Management, Vol. 11, № 1, 101–112. doi:10.6106/kjcem.2010.11.1.101
  10. Eskinasi, M. (2014). Towards housing system dynamics: Projects on embedding system dynamics in housing policy research. Amsterdam: Eburon Academic Publishers, 165.
  11. Burkun, I. G. (2010). Formirovanie tseny predlozheniia na rynke zhiloi nedvizhimosti regiona. Investytsii: praktyka ta dosvid, 7, 49–52.
  12. Mints, O. (2016). Metod opredeleniia dohodov razlichnyh grupp naseleniia. Nauchnyi vzgliad v budushchee, Vol. 7, № 2 (2), 71–74.
  13. Forrester, J. W. (1971). Osnovy kibernetiki predpriiatiia. Translated from English. Moscow: Progress, 466.
  14. Zhuk, O. V. (2009). Stan i perspektyvy rozvytku ipotechnoho kredytuvannia v Ukraini. Ekonomichnyi prostir, 23/1, 308–315.
  15. Mineev, A. A. (2012). Razrabotka instrumentariia planirovaniia sotsial'no-orientirovannogo razvitiia ekonomiki promyshlennyh predpriiatii. Moscow: Universitet MFYuA, 24.

Downloads

Published

2016-09-29

How to Cite

Минц, А. Ю. (2016). Modeling of the pricing process in the housing market by the methods of system dynamics. Technology Audit and Production Reserves, 5(4(31), 39–45. https://doi.org/10.15587/2312-8372.2016.81473

Issue

Vol. 5 No. 4(31) (2016): Economics and management of enterprise. Development of the productive forces and regional economy

Section

Economics and Enterprise Management: Original Research

License

Copyright (c) 2016 Алексей Юрьевич Минц

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

The consolidation and conditions for the transfer of copyright (identification of authorship) is carried out in the License Agreement. In particular, the authors reserve the right to the authorship of their manuscript and transfer the first publication of this work to the journal under the terms of the Creative Commons CC BY license. At the same time, they have the right to conclude on their own additional agreements concerning the non-exclusive distribution of the work in the form in which it was published by this journal, but provided that the link to the first publication of the article in this journal is preserved.