# RECORD 2792b4c943809eb914728ff2391864089ea9f685
# TITLE: Determinants of Real Estate Prices in the Statutory City of Brno
# YEAR: 2018.0  VENUE: Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis  DOI: 10.11118/actaun201866040991
# AUTHORS: Vlastimil Reichel; Petr Zimcik
# PAGES: 9  CANDIDATE TABLE PAGES (1-based): []
# ABSTRACT: The real estate market demand for both houses and flats has been growing recently. This trend is one of the factors, which are able to influence the price of real estate. Our paper introduces determinants of housing price and their influence on actual real estate prices in the statutory city of Brno. The aim of this paper is to present key determinants of house price and find the hedonic price model, which describes, how determinants affect house price best. Realized prices were analyzed for housing units located in different districts of Brno. Key determinants in this research are a year of sale, an area of flat in square meters, number of rooms, location in districts of Brno, type of masonry and reconstruction. The dataset covers the time period between years 2012 and 2015. Hedonic price model is estimated by the method of ordinary least square. Besides main aim, four assumptions were verified, which should determine the influence on the price of individual determinants in the statutory city of Brno.


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991
ACTA  UNIVERSITATIS  AGRICULTURAE  ET  SILVICULTURAE  MENDELIANAE  BRUNENSIS
Volume 66	
99
Number 4, 2018
https://doi.org/10.11118/actaun201866040991
DETERMINANTS OF REAL ESTATE PRICES 
IN THE STATUTORY CITY OF BRNO
Vlastimil Reichel1, Petr Zimčík1
1Masaryk University – Department of Economics, Lipová 41a, Brno, Czech Republic
Abstract
REICHEL VLASTIMIL, ZIMČÍK PETR. 2018. Determinants of Real Estate Prices in the Statutory of 
Brno. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 66(4): 991 – 999.
The real estate market demand for both‑houses and flats has been growing recently. This trend is one 
of the factors, which are able to influence the price of real estate. Our paper introduces determinants 
of housing price and their influence on actual real estate prices in the statutory city of Brno. The aim 
of this paper is to present key determinants of house price and find the hedonic price model, which 
describes, how determinants affect house price best. Realized prices were analyzed for housing units 
located in different districts of Brno. Key determinants in this research are a year of sale, an area of flat 
in square meters, number of rooms, location in districts of Brno, type of masonry and reconstruction. 
The dataset covers the time period between years 2012 and 2015. Hedonic price model is estimated by 
the method of ordinary least square. Besides main aim, four assumptions were verified, which should 
determine the influence on the price of individual determinants in the statutory city of Brno. 
Keywords: hedonic price model, price determinants, real estate market
INTRODUCTION
Real estates are goods with a  different structure. 
Property distinguishes from each other by their 
respective space allocation, orientation, building 
materials, number of rooms and their disposition, 
and other elements such as inner equipment. 
The  individual character of real estate results 
from the  demand of economic agents. The  aim 
of this research is to identify and analyze main 
determinants of house price in the  statutory city 
of Brno, and subsequently, find a  suitable model 
specification to correctly predict prices of real 
estates based on selected determinants.
House price is an outcome of the  intersection 
of a real estate market ’s supply and demand. Císař 
(1996) defines real estate market as a  component 
of the  general market system, which is subject 
to the  standard market regularity with possible 
deviations. It is determined primarily by nature of 
traded estate (non‑transferability, service‑life, etc.). 
In other words, the price of the estate is determined 
by consumer’s decision. They compare gains 
obtained from house purchase with inevitable 
costs. According to Sirmans et al. (2003), the theory 
of hedonic prices is one of the  theories, which 
deal with a problem of supply price‑setting on real 
estate market. The  theory of hedonic price model 
was developed to work with a  property, which 
has distinct characteristics but still are part of 
the  same group of objects (in our case real estate). 
These products are generally called differentiated 
goods. The  hedonic price model tries to identify 
price determinants depending on its quantitative 
and qualitative characteristics (due to the  type of 
analyzed product). It also assumes that finding of 
key determinants enables us to calculate sign and 
size of each determinant on final price separately.
Court (1939), Haase (1992) or Wallace (1926) 
are often considered as founders of the  hedonic 
price model concept. Their work, however, 
was not primarily focused on real estate price 
determinants. 
Authors, 
who 
as 
first 
used 
the concept of the hedonic price model to evaluate 
real estate, were Lancaster (1966) and then later 
Rosen (1974), Jud, Seaks and Winkler (1996) and 
also Helbich, Brunauer, Vaz, and Nijkamp (2014). 
These authors pointed to relevant real estate price