Journal of Property Research

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House price determinants in Athens: a spatial

econometric approach

Marianthi Stamou, Angelos Mimis & Antonis Rovolis

To cite this article: Marianthi Stamou, Angelos Mimis & Antonis Rovolis (2017) House price
determinants in Athens: a spatial econometric approach, Journal of Property Research, 34:4,
269-284, DOI: 10.1080/09599916.2017.1400575

To link to this article: https://doi.org/10.1080/09599916.2017.1400575

Published online: 14 Nov 2017.

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 Journal of Property Research, 2017
VOL. 34, NO. 4, 269–284
https://doi.org/10.1080/09599916.2017.1400575

House price determinants in Athens: a spatial econometric

approach
Marianthi Stamou, Angelos Mimis and Antonis Rovolis
Department of Economic and Regional Development, Panteion University of Social and Political Sciences,
Athens, Greece
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ABSTRACT ARTICLE HISTORY

In this paper, we try to identify the price determinants in the biggest Received 17 July 2016
real estate market of Greece, the metropolitan area of Athens. For that Accepted 31 October 2017
purpose, various spatial econometric models are used to explore their KEYWORDS
prediction ability and we are displaying the variations in property Spatial econometric; weight
prices for the wider area of Athens. These models have been compared matrices; hedonic method;
based on different criteria such as model fit, the Akaike information price determination; housing
criterion and variance of the residuals. Our results indicate that, in our prices
case, the spatial general model is the most appropriate simultaneous
autoregressive model when dealing with spatially autocorrelated
prices of housing properties data, in terms of our selection criteria.

1. Introduction
The housing sector in Greece has always been of great importance for the economy, as the
construction industry has supported the national and local economies in terms of employ-
ment, while the end product, residential property, has been one of the prime ‘products’
families’ wealth has been invested upon. The Greek housing market has some distinct
features. It is characterised by a high degree of homeownership, as the owner-occupation
rate is more than 75 per cent (Suárez, 2009); at the same time, the mortgage debt to the
Gross Domestic Product (GDP) ratio was rather low, at least up until the recent economic
crisis which caused the GDP to shrink significantly. One distinct forming feature of the
Greek housing market, especially in the years following the Second World War, was the
‘self-promotion’ of housing provision (as Allen, Barlow, Leal, Maloutas, & Padovani, 2004
have argued, this ‘self-promotion’ is a common characteristic of Southern European housing
markets), which is called ‘anti-parochi’1.
The sea-change in the Greek real estate market came with the economic crisis that the
country experienced from 2008 and onwards. Greece experienced the Great Recession with
a delay; the Greek financial institutions had a very limited exposure to the ‘toxic’ financial
assets, due to their orientation to ‘traditional’ financial products, such as the domestic
mortgage market. The repercussions for the real estate market were severe; the market
essentially collapsed, and transactions fell to a historical minimum. According to some

CONTACT Marianthi Stamou marianthi.stamou@panteion.gr

© 2017 Informa UK Limited, trading as Taylor & Francis Group
 270  M. STAMOU ET AL.

researchers, in the post-crisis Greece, there are 400,000 empty residential properties – a
significant number if weighted by population (see Chatzitsolis & Vlamis, 2014; where the
interested reader can also find a more detailed analysis of the real estate crisis in Greece).
There were, however, signs at the end of late 2013 that market stabilisation was under way
(Bank of Greece, 2014). In the light of all the above, the main research question of this
paper is to identify the price determinants in the biggest real estate market of the country,
the metropolitan area of Athens.
The ‘nature’ of real estate market leads to a ‘spatial’ analytical framework, as the pres-
ence of geographic submarkets within the real estate market or the clustering of similar
or dissimilar values in geographical space, has been well recognised and is referred to as
‘spatial autocorrelation’ or ‘spatial dependence’ (Can, 1990, 1992). In addition, spatial con-
siderations have always been fundamental to real estate and house pricing (Pace, LeSage,
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& Zhu, 2009). However, the spatial dimension of real estate data is not always taken into
account in the specification and estimation of traditional regression models, resulting in
the presence of spatial correlation between residuals. Attempts to remove this within the
traditional regression framework may lead to models of considerable complexity (Pace
et al., 2009). An alternative specification that builds the spatial structure into the model
may be preferable.
The problem of capturing spatial dependence, in the framework of spatial econometrics,
is accommodated by two basic processes, simultaneous and conditional autoregression (see
Cliff & Ord, 1981; Cressie, 1993; Ripley, 1981). In the present paper, the standard simulta-
neous autoregression models (the spatial general model (SAC), the spatial autoregressive
model (SAR), the spatial error model (SEM) and the spatial Durbin model (SDM)) are used
in order to take into account the spatial dependence of property prices.
Several studies have successfully utilised these methods, either adopting all types or
some of those. For instance, Valente, ShanShan, Gelfand, and Sirmans (2005) are using the
spatial simultaneous autoregressive and the spatial conditional autoregressive models for
out of sample rent prediction in the apartment sector, enabling an inference of conceptual
rent at any location in the market. Data from eight different metropolitan areas in the USA
are used. In another study, Wilhelmsson (2002), applied a spatial autoregressive model and
a spatial error model to hedonic pricing data and compared the results with a traditional
multiple regression modelling specification, using data from Stockholm. Gerkman (2012)
applied the hedonic approach to residential rents from Helsinki in Finland using three
models: ordinary least square (OLS), the spatial error model and the spatial Durbin model.
In that context, the spatial Durbin model works better than the spatial error model (the
Ordinary Least Squares (OLS) model lacks the ability to overcome the problem with omitted
variables). More spatial econometrics applications to house prices can be found in Dubin
(1988), Pace and Gilley (1997), Pace, Barry, and Sirmans (1998), Berg (2005), Case, Clapp,
Dubin, and Rodriguez (2004) and Smith and Wu (2009), among others.
Other approaches available in the literature, but not considered on our comparison, are
the Geographically Weighted Regression (GWR), the Artificial Neural Networks (ANN) and
the Geostatistical kriging method. The GWR was introduced by Fotheringham, Brunsdon,
and Charlton (2002). Unlike the global approach of the traditional spatial econometrics
techniques, where an average estimation of the statistical parameters is applied equally at
every observation around an area, the GWR, being a local model, does not provide single
statistical estimates, but spatial aware distributions of these parameters. Examples of GWR
 JOURNAL OF PROPERTY RESEARCH  271

applications in real estate research include Efthymiou and Antoniou (2013) who used it
together with simultaneous autoregression models to examine how transport infrastructure
and policies affect dwelling prices and rents in Athens. Similarly, Löchl and Axhausen (2010)
examined how OLS and GWR with simultaneous autoregression models deal with the spatial
autocorrelation, in order to establish the real estate price model for Zurich, Switzerland. The
ANN can be thought of as a mechanism that models the way in which the brain performs
a particular task or function of interest. They are made up of simple processing units and
they have the ability to store prior knowledge and make it available for use. The ANNs
approach has recently been the subject of several papers within real estate; Selim (2009),
with a sample of 5741 cases from the urban and rural areas of Turkey, compared the ANN
approach with the traditional regression analysis; Lin and Mohan (2011), studied the pre-
diction accuracy of the three most used models – the multiple regression model, additive
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nonparametric regression, and ANN, using the USA as a case study; Mimis, Rovolis, and
Stamou (2013) presented an application of the ANN approach and the spatial autoregressive
model in property valuation using data from Athens, Greece. Finally, Geostatistical kriging
applications to house prices can be found in Dubin, Pace, and Thibodeau (1999), Dubin
(2003), Anselin, Ibnu, and Kho (2004), Chica-Olmo (2007), among many others and its
main difference with spatial econometrics models is the calculation of weights. Kriging
weights are based on the spatial dependence or so called the semi-variogram analysis of
the price data, whereas the weights in simultaneous autoregression models are based on the
spatial contiguity between the sample data (Jahanshiri, Buyong, & Shariff, 2011).
Prior work has compared some of the models described above, as can be seen in Table
1, but none of these have simultaneously put in to workbench all the autoregressive mod-
els with different types of spatial weight matrix. The present paper explores not only the
performance of the various autoregressive models, but also their sensitivity to different
weighting schemes. As can be seen in Table 1, in previous works, when different neigh-
bourhood styles of spatial weight matrices are examined, the type of spatial simultaneous
autoregressive model tested is restricted (Ibeas, Cordera, dell’Olio, Coppola, & Dominguez,
2012; Wilhelmsson, 2002).
Among the various approaches described above, we have adopted the spatial econometric
models for two main reasons; firstly, to examine the spatial dependence in house prices
instead of the spatial heterogeneity modelled in GWR and secondly because they provide
us with an easier way to explore and explain the results in economic terms, in comparison
to ANN. The main scope of the analysis is twofold. Firstly, we focus on these techniques
with the aim of shedding light on to which of the simultaneous autoregressive model type
represents optimal performance according to the chosen criteria, and secondly, we try to
identify the price determinants in the housing market in Athens.
The remainder of this paper is structured as follows. Section 2 sets the theoretical frame-
work underpinnings of the hedonic theory in real estate, and illustrates spatial econometrics.
In section 3, the empirical data-set is presented. In Section 4, the econometric specification
and the regression results of spatial hedonic models are illustrated. Finally, Section 5 sum-
marises the empirical findings.
 272  M. STAMOU ET AL.

Table 1. Previous work using spatial simultaneous autoregressive models.

Aurthor Model W Criteria
Mathur (2013) SAR 4- nearest Moran’s I-test
SEM LM
Log likelihood
Efthymiou and Antoniou (2013) SAR 3- nearest Moran’s I-test
SEM AIC
SDM
SAC
GWR
Dubé and Legros (2013) SAR Spatio-temporal matrix R2 adj
SEM R2
Log-likelihood
Gerkman (2012) SEM 4- nearest Hausman test
SDM
Kuethe (2012) SAR 1/distance LM
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SEM
Ibeas et al. (2012) SAR Queen type Moran’s I-test
SEM 10-nearest AIC
SDM 1750 metres at least 1 neighbour
Osland (2010) SAR k-nearest Moran’s I-test
SEM AIC
SDM LM
SAC
GWR
Baumont (2009) SEM-LM* Distance 250 m Moran’s I-test
SEM-GMM* 7-nearest AIC
Max 7 nearest a cut-off distance 250 BIC
LM
Log likelihood
R2
Wilhelmsson (2002) SAR 1/distance Moran’s I-test
SEM 1/distance2 λ-value
1/distance within 600 metres R2 adj
1-nearest Log likelihood
4-nearest LM

Note: *SEM-ML is the maximum likelihood estimation of the spatial error model and SEM-GMM its estimation by the Gen-
eral Method of Moments.

2. Methodological background
2.1. Hedonic house price models
According to Rosen (1974), hedonic prices are defined as the implicit prices of attributes
and are revealed to economic agents from observed products and specific amounts of char-
acteristics associated with them. Moreover, a hedonic price model is a regression model
where the price of commodity is explained by the attributes of the commodity in question
(Rosen, 1974).
In the case of housing prices, hedonic theory states that the price of any given house
represents the price for a bundle of goods. According to Dubin (1988), the bundle of goods
for a hedonic house price model can be grouped into three broad categories: location var-
iables, structural variables and neighbourhood variables. Location variables refer to the
attributes which describe the geographical location of the object, for instance, the distance
to the central business district (CBD). Structural variables are attributes of the house itself,
for example, the size of the house, the number of rooms, the age of property and so on.
Finally, the neighbourhood variables, which measure the neighbourhood effects in the price
of property, are the inclusion of a set of characteristics pertaining to the socio-economic
 JOURNAL OF PROPERTY RESEARCH  273

and physical make-up of the neighbourhood (Can, 1992). For instance, the commonly used
variables for this purpose are the local crime rate and pollution or noise levels.
In many cases, the location and neighbourhood variables are grouped together (Can,
1992; Haider & Miller, 2000; Rosiers, Dubé, & Thériault, 2011) since many of neighbour-
hood variables could be also be considered as variables which describe the geographical
location of the property and vice versa. For example, a variable that belongs both in these
two categories is the distance from the metro stations. In addition, if the effects of these
variables (location and neighbourhood) lead to systematic differentiation in attribute prices,
this will indicate the presence of independent price schedules, thus the existence of a seg-
mented market (Can, 1992).
Practically, the third group of neighbourhood variables is not easily captured by the
price models, and in order to take account of their effects or the spatial heterogeneity of the
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attribute prices, it is necessary to use the spatial econometric models. An interesting meth-
odology for the analysis of sub-markets (neighbourhoods) can be found in Bhattacharjee,
Castro, & Marques, 2012.
In general, hedonic theory does not strictly specify a functional form (Cropper, Deck,
& McConnell, 1988; Halvorsen & Pollakowski, 1981). However, price models for housing
are often of the loglinear form or semilog form (DiPasquale & Wheaton, 1996; Malpezzi,
2003; Sirmans, Macpherson, & Zietz, 2005; Wilhelmsson, 2002). The semilog specification
has some advantages, such as that the coefficients can be easily interpreted as the percentage
change in the price given a one-unit change in the characteristic (Löchl & Axhausen, 2010).
Moreover, it helps minimise the problem of heteroscedasticity and mitigates the impact of
non-linear relationships between market price and the explanatory variables (Malpezzi,
2003). The general hedonic price function can be represented as:
P = f (L, S, N) + 𝜀 (1)
where P is a vector of observed housing values, L, S and N are vectors of location, structural
and neighbourhood characteristics and ɛ is the vector of random error terms.

2.2. Spatial econometric models

In the standard linear regression model, spatial dependence can be incorporated in two
distinct ways: as an additional regressor
[ in ] the form of a spatially lagged dependent varia-
ble (Wy), or in the error structure (E 𝜀i 𝜀j ≠ 0) (Anselin, 1988). The general spatial model
(SAC)2 includes both the spatial lag term and a spatially correlated error structure. As stated
in Anselin (1988), the formal model is:

y = 𝜌W1 y + X𝛽 + u
u = 𝜆W2 + 𝜀 (2)
2
𝜀 ∼ N(0, 𝜎 In )

where y is the dependent variable, ρ is the coefficient of the spatially lagged dependent
variable, 𝜆 is the coefficient in a spatial autoregressive structure for the disturbance u, W1
and W2 are the spatial weight matrices which can be either standardised or unstandardised,
X is the matrix of explanatory variables, β is the vector of unknown regression parameters
and ɛ the vector of independent and identically distributed (i.i.d) errors. Various forms of
 274  M. STAMOU ET AL.

heteroskedasticity in ɛcan be incorporated (Anselin, 1988), but this is beyond the scope of
the present study. W1 can be equal to W2,3 although in that case identification might not
be possible (LeSage, 1999).
The spatial autoregressive (SAR) model derives from model (2) by setting W2 = 0 (LeSage,
1999). This model implies that the levels of the dependent variable y are a function not only
of X, but also of adjacent (neighbouring) values of y.
On the other hand, the spatial error model (SEM) stems from setting W1 = 0 in (2)
(LeSage, 1999). According to Fischer and Wang (2011), this model includes another form
of spatial dependence which occurs when the dependence works through the error pro-
cess, in that the errors from different geographical points may display spatial covariance.
The spatial error model assumes that spatial autocorrelation is met only in the error term.
Finally, the spatial Durbin model (SDM) extends the SAR model by including spatial lags
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of the explanatory variables. This model explains the price of property using neighbourhood
prices as a set of independent variables, and the neighbourhood-level independent variables,
weighted by the spatial-weighting matrix. LeSage and Pace (2009) suggest that the SDM
model should be used when one believes that there may be omitted variables that follow a
spatial process and are correlated with the included independent variables.
The parameters of these models are usually estimated by the maximum likelihood
method (Anselin, 1988; Lee, 2004; Ord, 1975), the generalised method of moments (Kelejian
& Prucha, 1998, 1999; Lee, 2007), or the Bayesian MCMC method (Kakamu & Wago,
2008; LeSage, 1999), among others. In our application, we employ the maximum likelihood
method.

3. Data
The hedonic regression models used in the present application are estimated with data from
the metropolitan area of Athens. Figure 1 represents the spatial distribution of sampled
properties in the study area. The data collection was made from publicly available real estate
web-sites where real estate agencies as well as owners list their properties characteristics,
its location along with their asking price.
The reason for this is that in Greece there are no publicly available databases regarding
residential or commercial real estate; the national cadaster has not been completed as yet,
and only commercial banks keep data for their mortgage loans.
Specifically, in September 2013, the following house attributes were parsed: (1) asking
price, (2) square metres, (3) year of construction, (4) number of bedrooms, (5) number
of wc, (6) floor, (7) availability of independent heating, (8) air-condition, (9) fire place,
(10) natural gas, (12) parking availability, (13) storage place, (14) solar water heater, (15)
safety door, (16) awnings, (17) lift, (18) utilities, (19) type of view, (20) orientation and the
(21) geo-location (X, Y coordinates) on the Coordinate Reference System (CRS) ellipsoid
WGS84. Duplicate data, houses of unusual sizes and prices, and data with missing geograph-
ical information, price, or year of construction, were removed. The final database consists
of 11,148 dwellings for sale. Finally, the Euclidean distance of dwellings from the nearest
metro station metro and isap4 was included. Descriptive statistics for available location,
structure and neighbourhood characteristics are reported in Table 2. In this Greek data-
set, structural characteristics, which are city specific and thus important to our analysis are
the existence of parking spaces since free parking places are limited, the existence of air
 JOURNAL OF PROPERTY RESEARCH  275
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Figure 1. Sample points in the study region of Athens.

Table 2. Descriptive statistics of attributes.

Variable-description Mean Std.dev Min Max
price (€) 176,985 145,752 7000 1,500,000
sqm (m2) 89 37 25 300
age (years): 2013-year contraction 21 17 0 96
bedroom (number of bedrooms) 2 .79 1 6
wc (number of wc) 1 .41 1 5
fg (dummy): ground floor, 1 if TRUE .02 – 0 1
f0 (dummy): basement, 1 if TRUE .11 – 0 1
f1 (dummy): 1st floor, 1 if TRUE .25 – 0 1
f2 (dummy): 2nd floor, 1 if TRUE .22 – 0 1
f3 (dummy): 3rd floor, 1 if TRUE .16 – 0 1
f4 (dummy): 4th floor, 1 if TRUE .13 – 0 1
f5p (dummy): 5th floor or more, 1 if TRUE .11 – 0 1
ah (dummy): auto heat, 1 if TRUE .57 – 0 1
ac (dummy): air condition, 1 if TRUE .24 – 0 1
fireplace (dummy): 1 if TRUE .36 – 0 1
natural gas (dummy): 1 if TRUE .20 – 0 1
parking (dummy): parking, 1 if TRUE .50 – 0 1
storage (dummy): storage place, 1 if TRUE .51 – 0 1
solar (dummy): solar water heater, 1 if TRUE .26 – 0 1
door (dummy): safety door, 1 if TRUE .44 – 0 1
awnings (dummy): 1 if TRUE .26 – 0 1
lift (dummy): 1 if FALSE .02 – 0 1
utilities (dummy): 1 if FALSE .03 – 0 1
viewsea (dummy): view sea, 1 if TRUE .06 – 0 1
orfront (dummy): orientation front, 1 if TRUE .11 – 0 1
orairy (dummy): orientation airy, 1 if TRUE .33 – 0 1
orcorn (dummy): orientation corner, 1 if TRUE .09 – 0 1
orinside (dummy): orientation inside, 1 if TRUE .47 – 0 1
metro (dummy): 1 if = <500 m, 1 if TRUE .12 – 0 1
isap (dummy): 1 if = <500 m, 1 if TRUE .10 – 0 1
 276  M. STAMOU ET AL.

condition since high temperatures in the summer, the use of solar panels due to extended
sunshine hours, the existence of extra room for storage outside the apartments, and the
existence of characteristics present mainly in new properties, such as fireplace and auto heat.

4 Model specification
4.1. Spatial econometric models
At first, the hedonic multiple linear regression model was estimated in a semilog form
and different specifications were compared. We compare alternative specifications based
on the goodness of fit of the model as well as the statistical significant of the variables (the
respective Ordinary Least Squares -OLS- results can be found in Appendix Table A.1). The
preferred model is expressed as:
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ln Pr ice = 𝛽0 + 𝛽1 age + 𝛽2 sqm + 𝛽3 ah + 𝛽4 ac + 𝛽5 fireplace + 𝛽6 fg +

𝛽7 f1 + 𝛽8 f2 + 𝛽9 f3 + 𝛽10 f4 + 𝛽11 f5p + 𝛽12 viewsea+ (3)
𝛽13 storage + 𝛽14 parkin + 𝛽15 lift + 𝛽16 isap + 𝛽17 metro

Then the spatial autocorrelation in the residuals was examined using Moran’s I statistic with
the 500 metres neighbour weighting scheme. This yielded value of .36 (z-value = 165 and
p-value =<.001), indicating a strong clustering pattern in the residuals pointing the existence
of positive spatial autocorrelation. In other words, the data points with high absolute values
are located at the same area and those with low are also located together.
Thus, we proceed to estimate the SAC, SAR, SEM and SDM models using an identical
specification and the same weighting matrices for each one. Two types of spatial row-
weighted standardised matrices were used: the first was based on distance among obser-
vations and the second on differing number of neighbours. Specifically, following Griffith
(1996), the spatial weight matrices were constructed with four neighbourhood distances
(from 800 to 1400 m, in step of 200 m) and four k-nearest neighbourhoods (from 15 to
30, in step of 5).
To compare the spatial models and different weight schemes, several criteria have been
proposed in the literature (Kissling & Carl, 2008; Osland, 2010). We use the maximum
model fit (pseudo R2, in the following simply referred to as R2), the Akaike information
criterion (AIC) and variance of residuals (S2) as reported in Table 3.
Table 3 can be read first vertically by comparing, for each model, the Akaike information
criterion (Akaike, 1974). In this way, one can distinguish which weight scheme performs
better for each model. Further, one can compare horizontally the models in order to choose
the most preferable one.
From the estimation results, we see evidence that the general spatial model might be
appropriate for this modelling problem. In particular, the performance criteria for this model
is slightly higher than SEM, SAR and SDM models (see the results in Table 3). Moreover,
results indicate that in general, SAC and SEM models perform better than SDM and SAR.
However, the SAC model with a 30 – nearest neighbourhoods is the best performing model.
More specifically, SAR displays spatial autocorrelation in the residuals regardless of the
weight matrix style restricting us from using it. Similarly, SDM has positive spatial autocor-
relation when distance-based weight matrix is employed but although this is avoided with k
 JOURNAL OF PROPERTY RESEARCH  277

Table 3. Comparison among spatial econometric models.

Models SEM SAR
W style AIC S2 R2 Moran I AIC S2 R2 Moran I
800 m 6946 .11 .84 −.02 10,073 .14 .78 .19***
1 km 7074 .11 .84 −.01 9721 .14 .79 .15***
1.2 km 7312 .11 .83 −.003 9739 .14 .79 .13***
1.4 km 7524 .11 .83 .003 9856 .14 .79 .13***
15- nearest 7131 .11 .84 −.05 8714 .13 .81 .10***
20- nearest 6990 .11 .84 −.06 8795 .13 .81 .10***
25- nearest 6980 .11 .84 −.05 8839 .13 .81 .10***
30- nearest 6987 .11 .84 −.04 8860 .13 .81 .09***
Models SDM SAC
W style AIC S2 R2 Moran I AIC S2 R2 Moran I
800 m 9499 .14 .79 .16*** 6910 .1 .84 −.02
1 km 9019 .13 .80 .11*** 7048 .11 .84 −.01
1.2 km 8962 .13 .80 .08*** 7288 .11 .83 −.002
1.4 km 9137 .13 .80 .08** 7507 .11 .83 .003*
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15- nearest 6876 .13 .84 −.04 7020 .11 .85 −.04
20- nearest 6809 .13 .84 −.04 6827 .11 .85 −.04
25- nearest 6805 .13 .84 −.04 6728 .11 .85 −.03
30- nearest 6823 .13 .84 −.03 6669 .11 .85 −.02

Notes: Significant level: p < .001 ‘***’ p < .05 ‘**’ p < .1 ‘*’.
The ‘best’ model is the one with minimum AIC value.

nearest weight matrix the results do not differentiate for various values of k. This leaves us
with SEM and SAC which solve the problem of spatial autocorrelation in the residuals and
depict a specific pattern in the quality of the solution. So, AIC value shrinks as the distance
become smaller or as the number of neighbours increases when we build the weight matrix.
These two models were expected to distinguish form the others. Firstly, because SEM’s Data
Generation Process (GDP) is based on the hypothesis that spatial dependence is due to
attributional dependence meaning that shared attributes at neighbouring locations drive
the prices and this is what the authors feel that is happening in Athens. Secondly, SAC is a
combination of both SEM and SAR and thus merging spatial diffusion present in the form
of the spatially lagged dependent variable and attributional dependence present in the error
term, gives a holistic approach.
The regression results obtained with SAC are illustrated in Table 4. The model is fitted
by maximum likelihood and results in an R2 of .85. The coefficient parameter ρ reflects the
spatial dependence inherent in the sample data, measuring the average influence on obser-
vations by their neighbouring observations. It has a negative effect and is highly significant.
Except to the spatial lag term ρ, we have also a coefficient on the spatially correlated errors
𝜆 as an additional indicator. It has a positive effect and is highly significant too.
The values of the other parameters are also significant in all cases except the metro and
isap variables. An explanation could be that in the SAC model, the two spatial terms adjoined
with ρ and λ, have a strong impact on the model so that they absorb any environmental
variables such as metro, isap or distance to CDB. Moreover, all the parameters have the
expected signs, in line with the relevant literature (Anselin & Gracia, 2008; Efthymiou &
Antoniou, 2013; Osland, 2010).
It was considered important that the residuals derived from the SAC should not show
any significant degree of spatial autocorrelation. Moran’s I value for SAC residuals is −.0024
(z-value = −11 and p-value = .99). Therefore, there is no statistical evidence of spatial depend-
ence after the introduction of spatially lagged variable and dependent error parameter.
 278  M. STAMOU ET AL.

Table 4. Parameter estimates for the spatial general model.

Variable β z-value p-value
constant 15.63 73.72 <.001***
age −.01 −52.09 <.001***
sqm .01 115.22 <.001***
ah (auto heat) .03 4.29 <.001***
ac (air condition) .04 4.63 <.001***
fireplace .06 7.32 <.001***
fg (ground floor) −.56 −24.08 <.001***
f1 .17 16.56 <.001***
f2 .18 17.90 <.001***
f3 .19 17.74 <.001***
f4 .25 21.05 <.001***
f5p .30 24.37 <.001***
viewsea .03 2.46 .005**
storage .06 8.49 <.001***
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parking .08 9.08 <.001***

lift −.09 −4.79 <.001***
isap −.02 −.88 .38
metro −.02 −.86 .39

ρ −.42 −23.58 <.001***

λ .96 190.34 <.001***
R2 .85

Notes: Reference category for floor variable is basement.

Significant level: p < .001 ‘***’ p < .05 ‘**’ p < .1 ‘*’.

In order to compute the effect of the variables on the house prices using the general
spatial model, the equation needed to be transformed to its reduced form. In this case,
Equation 2 (SAC) becomes:

y = 𝜌Wy + X𝛽 + 𝜆W + 𝜀 ⇔
y = (I − 𝜌W)−1 X𝛽 + (I − 𝜆W)−1 𝜀

where (I – ρW)−1 represents a n × n inverse matrix.

As shown in Kim, Phipps, and Anselin (2003), the partial derivatives are:

𝜕y
= (I − 𝜌W)−1 𝛽 ⇔
𝜕X
𝜕y 1
=( )𝛽
𝜕X 1−𝜌

Since our specification is log-linear the marginal willingness to pay (MWTP) for each
variable x is:

𝜕eln Pr ice 1 ̂
MWTPx = = 𝛽 Pr ice.
𝜕x 1 − 𝜌̂ x

In practice, this can be computed using the average price and assuming that the housing
market is in equilibrium.
Table 5 outlines the impact of main house characteristics on purchase prices. The age
of the property has a negative effect on the average price, as each year from the year of
 JOURNAL OF PROPERTY RESEARCH  279

Table 5. Marginal implicit prices.

Variable MWTP
age −1720
sqm 1364
ac (air condition) 3529
ah (auto heat) 4548
fireplace 6996
fg (ground floor) −70151
f1 20,617
f2 22,975
f3 24,189
f4 30,753
f5p 37,644
viewsea 3940
storage 8086
parking 9991
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lift −11176

Note: The effect of the isap and metro variables on the house prices have not been computed because they are not statis-
tically significant.

construction of the property reduces the price of property by 1720 euros. The variable sqm
refers to the surface of the property, and has a positive impact on price which indicates the
buyer’s preference for larger apartments. On average, the value of apartments in Athens
is around 1364 euros per square metre. Variables denoting some quality characteristics of
the house, such as availability of independent heating, air conditioning, a fireplace (ah,
ac, fireplace variables, respectively), have a positive impact on the price. The variables of
the ground floor reduce the value of the property (in relation to the basement), while the
first, second, third, fourth floor and fifth floor increase its purchasing value. Moreover, if
the apartment has a sea view, the price increases by 3940 euros, whereas the lack of a lift
reduces the price by 11,176 euros. Finally, the availability of parking and storage space
impacts positively on the purchase price.
Figure 2 depicts the ‘output’ of the SAC model, which overcomes the issue of spatial
autocorrelation (Table 3 illustrates Moran’s I on the residuals). The points’ colours indicate
the predicted house prices. The result is in agreement with the actual spatial variation of
prices, pointing out high values in the north-east areas, and in the south, as well as the
city-centre, while, houses located at the west suburbs of Athens are cheaper.

5. Conclusions
The Greek housing market has experienced an unprecedented crisis as a result of the general
economic crisis sweeping the country post 2009. The housing market virtually collapsed
and the sub-market of the Athens metropolitan area was no exception. Research on the
impact of the crisis on the housing market is conducted mainly by non-spatial analysis,
with the exception of few pieces of research that have addressed the question of how the
spatial dimension of data have influenced prices in the Athens market.
One major obstacle in conducting research on Greek housing or commercial markets
is the paucity of publicly available data; for this reason a specific data-set from publicly
available real estate web-sites was created. For each property entry in the data-set, the loca-
tion, price and a set of characteristics were reported; such property characteristics include
property size and age, as well as a number of ‘quality’ features, such as existence of parking
 280  M. STAMOU ET AL.
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Figure 2. SAC results.

space or a solar water heater, property ‘view’, etc. These characteristics were complemented
with some variables regarding property distance from the nearest metro station.
In the empirical part of the analysis, several different spatial models have been used and
compared, namely the spatial general model (SAC), the spatial autoregressive model (SAR),
the spatial error model (SEM) and the spatial Durbin model (SDM). More particularly, a
hedonic linear regression model was initially estimated by OLS in a semilog form, and in
the next step the aforementioned spatial models were calibrated with the same weighting
matrices. The spatial models were compared in turn with the use of different weight schemes
on the basis of several criteria, such as the pseudo R2, the Akaike information criterion and
the variance of residuals. These criteria were found to show important variations among
different neighbourhood styles of spatial weights matrices. The results showed that the SEM,
SAR and SDM models performed better than the SDM and SAR models.
The economic interpretations of the findings showed that almost all independent varia-
bles have had the ‘expected’ impact on purchase prices. The age of properties had a negative,
yet moderate, effect on price; property surface, as well as qualitative variables (i.e. independ-
ent heating, air conditioning, the existence of a fireplace or a parking space) had a positive
effect. Similarly, properties on a higher floor had a higher price in comparison to properties
on lower floors; this particular result corroborates the empirical view of real estate profes-
sionals, as well urban scientists that the more affluent households in the Athens housing
markets prefer to live in higher floors. It has to be mentioned in passing that in Athens, as
in other European cities such as Paris or Vienna, vertical social differentiation coexisted (if
not prevailed to), with ‘horizontal’ social differentiation (for an extensive analysis see, for
 JOURNAL OF PROPERTY RESEARCH  281

instance, Maloutas and Karadimitriou, 2001); thus, it is a reasonable hypothesis that the
results regarding higher prices in higher floors reflect the feature of vertical differentiation.
The predicted house prices by the SAC model were in accordance to the actual spa-
tial variation of prices; put differently, the predicted prices depict the price differentiation
between the most high-priced areas in the north-east and south (costal) suburbs, along with
the rather expensive properties at the city centre, and the ‘cheaper’ west suburbs.
This analysis gives a snapshot of the housing market in the metropolitan area of Athens
in the midst of the economic crisis. It would be interesting to complement this piece of
research with the application of this type of methodology to a commercial property data-
set (if such a data-set was available) with the intention of investigating the performance of
the spatial models in a different context.
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Notes
1. 
Chatzitsolis & Vlamis (2014) have used the term ‘counter performance’, which, however, does
not convey the full ‘nature’ of this form of development.
2. 
In this paper, we use the acronyms most commonly used in the spatial econometrics literature
to refer to the model specifications (see e.g. LeSage & Pace, 2009).
3. 
In our case, there are no a priori reasons to assume that the spatial interaction patterns are
different, then W1 and W2 which are exogenously determined are assumed identical.
4. 
Isap is the acronym for the Electric Trains of Athens and Piraeus, which is in essence the
older line of metro system.

Acknowledgements
The authors would like to thank the editor and the three anonymous reviewers for their comments and
suggestions during the review process as well as Professor Clive Richardson and Assistant Professor
Gregoris Siourounis for their comments on an earlier manuscript.

Disclosure statement
No potential conflict of interest was reported by the authors.

Notes on contributors
Marianthi Stamou, (geographer, BSc Aegean, MSc Athens, PhD Athens) is conducting research in
the spatial econometric models of property valuation.
Angelos Mimis, (mathematician, BSc Patras, MSc Southampton, PhD Leeds) is an assistant professor
in the Department of Regional and Economic Development in Panteion University of Athens in the
field of Informatics. His research interests include GIS, neural networks and optimisation.
Antonis Rovolis, (economist, BA Athens, MA Sussex, PhD LSE) is an associate professor of Spatial and
Urban Economics at the Department of Economic and Regional Development, Panteion University
of Athens. His areas of expertise include real estate economics, urban and regional infrastructure
investment, urban and regional economic growth, spatial dimensions of new technologies and new
economic geography.
 282  M. STAMOU ET AL.

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Appendix A.

Table A.1. OLS results.

Variable β t-value p-value
constant 10.53 589.72 <.001***
age −.01 −35.37 <.001***
sqm .01 115.41 <.001***
ah (auto heat) .06 6.53 <.001***
ac (air condition) .07 6.17 <.001***
fireplace .14 13.90 <.001***
fg (ground floor) −.61 −19.45 <.001***
f1 .11 8.35 <.001***
f2 .13 9.65 <.001***
f3 .11 7.65 <.001***
f4 .14 8.82 <.001***
f5p .14 8.78 <.001***
viewsea .11 7.18 <.001***
storage .08 7.58 <.001***
parking .13 10.62 <.001***
lift −.25 −9.88 <.001***
isap −.14 −10.99 <.001***
metro .14 12.15 <.001***

R2 .77
F-statistic 2248 <.001***
Residual standard error .39

Notes: Reference category for floor variable is basement.

Significant level: p < 0.001 ‘***’ p < 0.05 ‘**’ p < 0.1 ‘*’