Descrição e Termos:

The real estate market constitutes a key sector of any country’s economy. Understanding how it works therefore is crucial for the elaboration and implementation of real estate policies. Consequently, the comprehension of the mentioned systematic requires reliable estimates of the real estate demand function, which is important to know how the individual real estate consumption varies in relation to variations either in the family income or in the real estate prices – what can be defined as the knowledge of the income-elasticity and also as prices-elasticity in real estate market. It should be observed that traditionally the econometric approach uses a classical regression model to estimate the mentioned analysis, without considering the spatial effects in the functions’ estimate. In this case, unfortunately, the obtained results cannot explain with reliability the real estate market behavior, once they might have problems of bias, consistence, and efficacy. After criticizing the referred traditional methodology, this paper shows how to incorporate spatial effects in the models looking forward to analyze with more precision the real estate market’s behavior. Finally an empirical analysis carried out on the estimating of a Real Estate Demand Function for Recife city, Brazil, corroborates the new evaluation’s mechanism shown. In this study the price-elasticity estimated by the Traditional Model represents less than 50% of the results accomplished by using the presently exposed methodology.

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