What are the most important factors that influence the changes in London Real Estate Prices? How to quantify them?

TL;DR

This paper analyzes the key factors influencing London real estate prices from 1996 to 2016, using principal components analysis to address multicollinearity and identify vital factors affecting price changes.

Contribution

It develops a housing price model for London that objectively quantifies influential factors and proposes countermeasures for price control, addressing previous theoretical limitations.

Findings

Identifies key factors affecting London house prices.

Uses principal components analysis to handle multicollinearity.

Provides insights for policy measures to control prices.

Abstract

In recent years, real estate industry has captured government and public attention around the world. The factors influencing the prices of real estate are diversified and complex. However, due to the limitations and one-sidedness of their respective views, they did not provide enough theoretical basis for the fluctuation of house price and its influential factors. The purpose of this paper is to build a housing price model to make the scientific and objective analysis of London's real estate market trends from the year 1996 to 2016 and proposes some countermeasures to reasonably control house prices. Specifically, the paper analyzes eight factors which affect the house prices from two aspects: housing supply and demand and find out the factor which is of vital importance to the increase of housing price per square meter. The problem of a high level of multicollinearity between them is solved by using principal components analysis.