Property Mix Heterogeneity and Market Cycles: How Much Can We Rely on Median-Price Indices?

Odilon Ricardo da Hora Gonçalves Fernandes Costa, Eduardo Cazassa


Objective. Understand in which types of location median-price indices could provide reasonable estimates of rent growth. As far as our research allows, the market-based measures developed througout this study are the first to emphasize office properties in Brazil using an hedonic framework.

Methodology. Create appraisal-based indices of rent growth using median-price and hedonic-based techniques for two regions with different degrees of property mix heterogeneity and compare their behavior overtime.

Findings. Volatility in median-price measures is larger than hedonic-based measures in market peaks and throughs due to different weighting of high and low-tier properties overtime. This result is stronger in the location with higher property mix heterogeneity and, consequently, exacerbates market cycles in this region.  

Limitations. We do not find statistically significant differences between the measures considered. Nevertheless, we do not consider whether this similarity would hold when using transactional-based data.    

Value. Our results suggest that researchers, policy makers and investors need to take into account the “undesired fluctuation” of median-price measures when interpreting such indices. 



commercial real estate, office properties, indices, Brazil

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