Research Projects

Definition of Submarkets for Property Valuation in Bogotá, Colombia

Start Date: December 2008
End Date: February 2010

Researchers
Nancy Lozano-Gracia holds a PhD in economics from the University of Illinois, was a post-doctoral researcher at the GeoDa Center at Arizona State University, and currently works as an economist at the World Bank. Luc Anselin is the Director of the School of Geographical Sciences and GeoDa Center of the School of Geographical Sciences at Arizona State University.

Description
The current appraisal process of the city of Bogotá has remained unchanged since its implementation in the late 1980s. Local government officials are interested in improving and updating this appraisal process. However, because such changes would require modifications to the property tax law, it is necessary to carefully study the effects that changes to the original mass appraisal model might have on the estimation of property values. In this study we look at the effects on prediction power of introducing space into the model for valuation of construction. First, we look at the consequences of allowing for spatial heterogeneity through the use of alternative definitions of submarkets and then look at further biases introduced by spatial correlation. The alternative specifications are evaluated in terms of their prediction ability. The results from this study will serve as a guide on how to improve mass appraisal practices and policies for the city of Bogotá, Colombia and potentially set an example for other Latin American cities.