Detecting and validating residential housing submarkets: A geostatistical approach for use in mass appraisal

Purpose – The purpose of this paper is to describe a segmentation technique based on geostatistical modeling methods utilizing geographically weighted regression (GWR) to identify submarkets which could be applied within the mass appraisal environment.Design/methodology/approach – Given the spatial dimension within which neighbourhoods/submarkets exist, this paper has sought to utilize the geostatistical technique of GWR to identify them.Findings – The efficacy of the procedure is established by demonstrating improvements in predictive accuracy of the resultant segmented market models as compared to a baseline global unsegmented model for each of the study areas. Optimal number of segments is obtained by measures of predictive accuracy, spatial autocorrelation in the residual errors and the Akaike information criterion.Research limitations/implications – The three datasets used allowed for an evaluation of the robustness of the method. Nonetheless it would be beneficial to test it on other datasets, parti...