This paper argues that judgment on the most appropriate distance threshold of residential property from public transport should be based on a systematic
assessment, rather than a heuristic approach.
Hedonic price method is a commonly used technique for modelling house prices. These models typically include information about physical attributes of houses, locational characteristics and the neighbourhood quality. Inclusion of location variables here serves at least two purposes. First, it ensures that the information set used in explaining house prices is comprehensive so that econometric models will not suffer from omitted variable bias. Secondly, it allows for an investigation into the impact of specific location variables on house prices.
One such frequently employed location variable is a ‘distance zone’ that is used to capture the impact of proximity to bus stops on house prices. A 400m distance threshold is often considered appropriate in those situations. This paper argues that this judgment on the most appropriate distance threshold should be based on a systematic assessment, rather than a heuristic approach. The traditional as well as spatial hedonic house price models estimated using Sydney data validate this view.
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