FACTOR ANALYSIS IN DETERMINING THE SIMILARITY OF LOCAL REAL ESTATE MARKETS' CONDITIONS

Abstract

Interest in research on the issue of real estate market similarity results from many practical problems, especially connected with land management and land administration. The authors assume that factor analysis, as a statistical method among multivariate analysis methods, can be a useful tool for the determining the similarity of local real estate markets' conditions. The authors exploited information from six variables describing local real estate markets to create two new independent main factors that, together, account for 80% of variability of the primary variables. Using factor analysis, it was possible to build a two-dimensional space in which the location of each real estate market can be described using the new main factors as coordinates. Although the practical research was conducted on chosen Polish cities in the Warmia-Masuria Province, the same methodology can be applied to other markets as well.