Testing the use of Contingent Valuation Method in Real Estate Market: first results of an experiment in the city of Milan

Abstract

One of the most criticism in Real Estate appraisal processes based on sales comparison approach is the reliability of data about market prices of comparable properties. In this context, the use of evaluation methods based on hypothetical markets, most widely used in the field of the evaluation of environmental goods or cultural heritage, could solve that problem. It has been found  that estimating the willing to pay (WTP) for a sample of goods with different features brings to reliable outcomes with negligible gaps by comparison with the values obtained by the more traditional real estate appraisal methods. According to these general assumptions, the paper suggests the use of Contingent Valuation Method with the aim of replace in the appraisal models the market prices of a sample of properties with the WTP for the same goods.