Listing behaviour in the Italian real estate market

Purpose In Italy selling prices are not public information and therefore listing prices play a key role for market analyses and are used by real estate companies and appraisers for estimating house values. The main purpose of this paper is to explore the listing behaviours of agents and sellers. In particular, the paper analyzes listing prices and the predicting power of the house features described in advertisements, to improve their use in real estate valuations. Design/methodology/approach We employed a traditional hedonic model to measure the overall contribution to listing price of the characteristics described in advertisements. We performed the analysis both on houses put on the market by agents and on houses put on the market by sellers. We analyzed listing price distributions and their deviation from normality. Furthermore, we performed the hedonic analysis, which consisted in two steps. Firstly, the coefficient of determination for any characteristic was computed. Secondly, we measured the overall contribution to the listing price of the characteristics described in advertisements. Findings The analysis shows the presence of factors which affect listing prices and which are not revealed to buyers in real estate advertisements. On the other hand, we also found the presence of characteristics that do not affect the listing price but are described in advertisements. Furthermore, agents and sellers showed different behaviours. While the marginal contributions of each characteristic estimated on a sample of houses put on the market by agents were significant, our analysis reveals that listing prices of houses put on the market by sellers themselves are not explained by the house features. Originality/value To our knowledge, this is the first study to propose a hedonic approach to exploring the major determinants of listing prices of houses on sale on the Italian market. The listing behaviour of agents and sellers and the predicting power of the observable characteristics could address the use of listing prices in real estate valuations. At the same time, the potential presence of unobservable factors that affect the listing price could be a source of bias in estimating the value of houses.