Regression analysis residential real estate

Dutch investors (participating in the ROZ-real estate index) have invested a total sum of € 37.6 billion in real estate. Investments in houses make up 44% of this sum. Despite the size of the investments in this sector, decision-making is based on the experience and gut feeling of the investor, and his notion of how the properties of real estate objects influence the return on investment and the associated risk. There is no objective way of measuring the influence that the properties of real estate objects have on the return on investment. This state of affairs induced one of our students (Bomer, 2002) to write her graduation thesis on this subject.

Bomer uses multiple regression analysis to find out what properties of real estate objects directly influence the return on investment. She bases her research on a database of some three hundred objects, containing data gathered over several decades. The objects are exclusively residential real estate projects. The analysis includes the following steps:

1. Determine object properties that might be relevant;

2. Analyse the database using correlation analysis;

3. Perform single regression analysis;

4. Perform multiple regression analysis.

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