Estimating distance gradients for apartment properties

The effect of distance from the city centre on selling price, tax assessmen t and gross income is investigated for income property in proximity to the city centre. Hedonic estimation with a multiplicative model specification i s used to estimate the relationship between property characteristics on the one hand and price, assessment and income on the other. The sample consist s of centrally located apartment buildings in downtown Stockholm sold durin g a recent three-year period. The application is specific to Stockholm, but the methodology and the insights gained are general. The results include t he estimation of price gradients for the dependent variables. The models ar e used for estimating the implicit capitalisation rates in the property mar ket as a function of the distance to the centre. We also estimated where th e market appears to place the city centre as implied by the observations. A lthough no rent gradient was found, we were able to detect a significant ne gative price gradient. The former is reasonable considering the rent contro l ordinances. The latter indicates the existence of a negative land rent gr adient.