Specifying the effect of location in multivariate valuation models for residential properties : A critical evaluation from the mass appraisal perspective

Purpose – The purpose of this research is to explore from a mass appraisal perspective how the effects of location are reflected within valuation models. The paper sets out to detail the various techniques and the efficacy of their application. Design/methodology/approach – The approach adopted is analytical and based upon the development of locational attributes. An extensive literature base is synthesized with methods being evaluated in their application to mass appraisal. Findings – This research has identified that the three main groups interested in residential property valuation, namely, academia, industry and commerce have to a certain extent been unfamiliar with the research developments occurring in the other groups. The impact of this is important, given the need for integration and collaboration in terms of future model development. Research limitations/implications – The research underpinning this paper will provide a solid basis for further research into this area. The importance of measuring the effect that location has on value is of major significance in the determination of objective estimates of property value. Practical implications – Those within the assessment community could be described as pragmatists working in a situation that requires feasible and suitable solutions to the problem of measuring location value. It is our contention that the third generation techniques of spatially varying parameter models and spatial autocorrelation models will require greater industry verification before their use becomes more widely accepted. Originality/value – This paper provides a detailed analysis of methodologies used to reflect the value of location over the last 50 years. The debate is taken forward by describing what will be the contribution to the development of the next generation of location‐specific modeling techniques.