THE IMPORTANCE OF DISTANCE IN HEDONIC HOUSING PRICE MODEL – THE CASE OF ZAGREB

The goal of this paper is to estimate the effect of distance from city center on housing prices in Zagreb within the hedonic model. Presented model is the fi rst in Croatian literature which at the same time includes distance, other locational variables, internal characteristics and the effect of the time of transaction. This research differs from the current practice in Croatia in the fact that, up to now, location of dwelling was mainly approximated with city district, neighborhood etc. Estimation of distance effects, along with other locational variables, was performed within hedonic models of offer and achieved housing prices. Results show that the distance from the city center and the variables which describe the location of dwelling on certain side of world are statistically signifi cant for explaining prices in the Zagreb housing market. Furthermore, their inclusion in the hedonic model improves its goodness of fi t compared to previous models constructed for Croatian housing markets.