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Journal of Property Investment & Finance

Emerald Article: Architecture for a real estate analysis information


system using GIS techniques integrated with fuzzy theory
Elli Pagourtzi, Konstantinos Nikolopoulos, Vassilios Assimakopoulos

Article information:
To cite this document: Elli Pagourtzi, Konstantinos Nikolopoulos, Vassilios Assimakopoulos, (2006),"Architecture for a real
estate analysis information system using GIS techniques integrated with fuzzy theory", Journal of Property Investment & Finance,
Vol. 24 Iss: 1 pp. 68 - 78
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JPIF
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68

Architecture for a real estate


analysis information system
using GIS techniques integrated
with fuzzy theory
Elli Pagourtzi, Konstantinos Nikolopoulos and
Vassilios Assimakopoulos

Received August 2004


Accepted September 2005

National Technical University of Athens, Athens, Greece


Abstract
Purpose Proposes a new real estate valuation methodology and presents the architecture for a
decision support system for real estate analysis based on Geographic Information Systems (GIS)
techniques integrated with fuzzy theory and spatial analysis.
Design/methodology/approach The proposed information system architecture/problem-solving
methodology uses GIS technology integrated with two approaches: fuzzy logic and spatial analysis.
The steps required in the proposed methodology are: database design and implementation; criteria and
rules; system design; and implementation. The components/modules included in the proposed
methodology are: requirement and definition analysis; data production; topology; integrated database;
visualization; variables; quantification; valuation; and implementation.
Findings The applicability of the system is evaluated via a case study in estimation of house sale
prices. The proposed system/methodology was used in order to valuate property values in one
municipality of Attica in Greece. The estimation, market analysis, forecasting and management of
property values are of great importance and a prerequisite for real estate development.
Originality/value The proposed methodology is innovative, easy to implement and has a vast
theoretical background. Following the methodology/architecture, a prototype information system is
presented in order to move from theory to practice. The value of the paper is the combination of new
technology assessments and GIS tools, integrated with fuzzy theory and spatial analysis.
Keywords Real estate, Urban areas, Assets valuation, Geographic information systems, Fuzzy logic
Paper type Research paper

Journal of Property Investment &


Finance
Vol. 24 No. 1, 2006
pp. 68-78
q Emerald Group Publishing Limited
1463-578X
DOI 10.1108/14635780610642971

1. Introduction
Real estate analysis in urban areas is an important and very difficult task (Paz, 2003;
Schmitz and Brett, 2002; Bloch, 1997; Li, 1996; Byrne, 1995). The problem of evaluating
real estate property accurately has discussed broadly within the academic community
during the last decade (Pagourtzi et al., 2003; DAmato, 2002; Dos Santos Reis et al.,
2002; Graham and Max, 2001; Liow, 2001; Tse, 1997; Lundstrom and Lind, 1996;
Graaskamp, 1992; Czernkowski, 1990). The value of a property is primarily determined
by its location (Pagourtzi et al., 2003). Thus a geographical information system (GIS) is
of great importance in the evaluation process (McCluskey et al., 1997; Theriault et al.,
2003; Wyatt, 1996; Zeng and Zhou, 2001). In the last decade a very promising approach
to dealing with uncertainty in real estate analysis has been fuzzy theory due to the
Winner of the EFG Eurobank-PropIndex SA Prize for the Best Paper on Balkan Real Estate.

necessity of handling the large number of qualitative and quantitative variables that
affect the value of an estate (Byrne, 1995; Pagourtzi et al., 2003; Zeng and Zhou, 2001;
Lee et al., 2003; Stumpf et al., 2003). This study proposes a new methodology and
discusses the architecture for a decision support system for real estate analysis based
on GIS techniques integrated with fuzzy theory and spatial analysis.
This study is structured as follows: the next section presents a short literature
review on the research field. Section 3 describes the proposed methodology and
architecture. The methodology is evaluated in section 4 via a case study from the
urban area of P. Faliro in the Attica Basin of Greece. The study ends with some
conclusions.
2. Literature review
In the early 1990s Kang and Reichert (1991) and Knight et al. (1993) proposed various
regression model approaches in order to cope with the scientific problem under
consideration. Sui (1992) introduced fuzzy logic into the field. Byrne (1995) provided the
key study in the field, raising most questions for the years to come. Pagourtzi et al.
(2003) provided an extensive survey of all available valuation methods. Zeng and Zhou
(2001) presented REGIS, a prototype of a real estate GIS. At the ERES 2003 conference,
Lee et al. (2003) and Gonzalez et al. (2003) presented very effective fuzzy approaches to
the problem.
3. Architecture/methodology
The proposed information system architecture/problem solving methodology uses GIS
technology integrated with two approaches:
(1) fuzzy logic; and
(2) spatial analysis.
The methodology described attempts to propose an innovative real estate valuation
model.
The steps required in the proposed methodology are the following:
(1) Database design and implementation. The database contains temporal and
spatial data. Spatial data comes in two categories: raster data (satellite images
and orthophotos) and vector data (boundaries, coastlines, streets, etc.). The
database also contains attributes of spatial data (like real estate descriptive
characteristics, real estate values, estimations, etc.).
(2) Criteria and rule development including real estate variables with the use of
fuzzy set methodology.
(3) Integrated information system design and implementation:
.
specifications of the architecture of the system and the of work environment
requirements of the user;
.
determination of the architecture of the network and the application;
.
specifications of the architecture of the database;
.
specifications of the architecture of the user interface; and
.
implementation of systems components and user interface.

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information
system
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The components/modules included in the proposed methodology (see Figure 1) are:


.
requirement and definition analysis determination of the requirements of users
will lead to a frame of requirements that will also determine the experimental
scripts of application for the evaluation of the system;
.
data production;
.
topology;
.
integrated database all the information extracted will be stored in the systems
database, and database fields and records will be defined;
.
visualization;
.
variables definition of the variables that affect real estate market value;
.
quantification real estate variable quantification;
.
valuation; and
.
implementation includes the processes of sub-system development according
to the architecture: implementation of graphical user interface will be developed
and the possibilities of personalising the interface depending on the type of
user will be investigated.

4. Case study
The applicability of the system is evaluated via a case study in the estimation of house
sale prices. The proposed system/methodology was used in order to estimate property
values in one municipality of Attica in Greece. The estimation, market analysis,

Figure 1.
Methodology components

forecasting and management of property values are of great importance, and are a
prerequisite for real estate development.
4.1 Variables
The methodology depends on variables. These can be grouped into environmental
variables (e.g. neighbourhood, distance or proximity), and property variables
(quantitative and qualitative variables of the property). Some of the variables can be
measured, while others cannot. The quantification of variables may become easier
through GIS tools (buffering, overlay and modelling).
4.1.1 Environmental variables. Environmental variables include:
.
distance from sea;
.
distance from waterside Floisvos;
.
distance from waterside Edem;
.
distance from Phalerum cove;
.
distance from nearest park;
.
distance from nearest athletic club;
.
distance from nearest recreation facility;
.
distance from nearest school;
.
distance from river;
.
distance from shopping center;
.
distance from cemetery;
.
level of noise (noise pollution);
.
level of air pollution;
.
view and aspect; and
.
level of commercial facilities
4.1.2 Property variables. The property variables include:
.
corner house;
.
area in square meters;
.
floor;
.
number of bedrooms;
.
age of house;
.
year of sale;
.
outdoor surface;
.
area without outdoor surface; and
.
commercial coefficient of estate.
4.2 Knowledge-based system: criteria and rules
In knowledge-based methods, fuzzy sets are employed primarily to carry out the
formal, content-defined mapping of human knowledge. This makes it possible to

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process human empirical knowledge with electronic data-processing systems. This


includes the following main functions:
.
knowledge acquisition expert knowledge is acquired from textbooks or by
means of processing training examples;
.
knowledge representation this is normally carried out by means of rules in the
so-called knowledge base;
.
contextual knowledge processing this is normally carried out in an inference
engine, which must be able to process linguistic knowledge in contextual form
(and not in symbolic form); and
.
translation on the input side, numerical information is translated, where
possible, into linguistic information (fuzzification), and on the output side
specific membership functions are translated either into numbers
(defuzzification) or into linguistic expressions (linguistic approximation).
In knowledge-based methods, a missing or inefficient algorithmic formulation is
replaced by the use of human knowledge.
The system provides knowledge-based fuzzy methods primarily for two areas of
application:
(1) knowledge-based data analysis; and
(2) control via fuzzy methods (fuzzy control).
These two applications are described in greater detail below. First of all, however, it is
appropriate to present the methods which are common to both areas of application.
In order to solve a problem which is based on uncertain or fuzzy observations or
correlations, it is necessary to describe, map, and process the influencing factors in
fuzzy terms and to provide the result of this processing in a useable form. These
requirements result in the basic elements of a knowledge-based fuzzy system:
.
knowledge base (definition of the linguistic variables, terms and rules);
.
processing of the input variables (fuzzifying);
.
inference engine (analysis); and
.
processing results (defuzzifying).
This can be seen schematically in Figure 2.
The (scalar) inputs are transformed into memberships of fuzzy sets by fuzzifying
functions. This information, together with the declared rules, is given to the inference
engine, the result again being a set of memberships of fuzzy sets (terms for the output
variables). The last step is to transform these membership values into the required
scalar output variables by defuzzifying. The following sections will discuss in detail
each of these individual steps.
The knowledge base contains all the knowledge for the solution of the given
problem. That is:
.
the definition of the linguistic variables and their terms (fuzzy sets); and
.
the (fuzzy) production rules.

The linguistic variables and their terms form the building blocks for the production
rules in the form shown in Figure 3.
The premises (conditions) and the conclusions in each case consist of statements in
the form:
(Variable)

IS

Real estate
information
system

(Term),

and are connected together with one another by the standard logic operator AND. A
certainty factor, as with conventional expert systems, can be given which indicates the
degree to which a rule is fulfilled over the range [0 . . . 1]. Certain variables (namely
input variables) are used only in the premise part of the rule; others (output variables)
are used exclusively in the conclusion part of the rule (see Figure 4).

73

4.3 Real estate valuation based on fuzzy methodology


In order to solve a real estate problem with a knowledge-based fuzzy system it is
necessary to describe and process the influencing factors in fuzzy terms and provide
the result of this processing in an easy to handle form. The basic elements of a
knowledge-based fuzzy system are:
.
fuzzification;
.
knowledge base;
.
processing; and
.
defuzzification.
After data input process in the system we complete the following processes:
.
define the linguistic variables;
.
define the membership functions;
.
define the linguistic symbols;

Figure 2.
Knowledge-based fuzzy
system

Figure 3.

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Figure 4.
Rule components
.
.

build the rules; and


define knowledge-based operator between fuzzy-based rules (inference).

Several types of membership functions can be utilized which reflect the knowledge for
the specific object or event (Burrough, 1996). Every continuous mathematical function
can be approximated by a fuzzy set. For example the criterion distance from sea can
be approximated from the membership function illustrated in Figure 5. Distance from
sea is an environmental variable that defines the distance each estate from coastline in
meters (see Figure 6 and Table I).
The membership functions of the distance from sea criterion are:
9
8
0;
if distancex # 350
>
>
>
>
=
<
1;
if
250
,
distancex
,
790
;
minimumx
>
>
>
>
;
: 0;
if distancex $ 790

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information
system
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Figure 5.
Membership function for
the criterion distance
from sea

Figure 6.
Histogram, distance from
coastline (Marina
Flisvos)

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Table I.
Statistics of distance
from sea

Valid
Missing

Mean
Standard error of mean
Standard deviation
Variance
Skewness
Standard error of skewness
Kurtosis
Standard error of kurtosis
Range
Minimum
Maximum
Percentiles

25
50
75

141
0
1,359.9078
55.89603
663.72853
440,535.55572
0.477
0.204
2 0.259
0.406
3,090.00
205.00
3,295.00
867.0000
1,321.0000
1,795.0000

9
8
0;
if distancex # 790
>
>
>
>
>
>
>
>
>
>
>
>
distancex
2
790=81;
if
790
,
distancex
,
871
>
>
>
>
=
<
1;
if 871 # distancex # 1; 350
;
mediumx
>
>
>
>
>
>
1; 445 2 distancex=95; if 1; 350 , distancex , 1; 445 >
>
>
>
>
>
>
>
>
>
;
:
0;
if distancex $ 1; 445

8
0;
>
>
>
>
>
>
distancex 2 1; 393=407
>
>
<
1;
maximumx
>
>
> 2; 586 2 distancex=31
>
>
>
>
>
:
0;

too farx

9
>
>
>
>
>
if 1; 393 , distancex , 1; 800 >
>
>
=
if 1800 # distancex # 2; 555 ;
>
>
>
if 2555 , distancex , 2; 586 >
>
>
>
>
;
if distance $ 2; 586
if distancex # 1; 393

8
0;
>
>
>
>
>
< distancex 2 2; 550=100;

9
>
>
>
>
=
if 2550 , distancex , 2; 650 >

>
>
>
>
>
:

if 2650 # distancex , 3; 000 >


>
>
>
>
;
if distance $ 3; 000

1;
0;

if distancex # 2; 550

5. Conclusions
This paper discusses the methodology and architecture for a decision support system
for real estate analysis based on GIS techniques integrated with fuzzy theory and
spatial analysis.
The proposed methodology is innovative, easy to implement and has a vast
theoretical background. Followed this methodology, an architecture for a prototype
information system has been presented in order to move from theory to practice.
The proposed methodology, architecture and prototype were effectively tested and
evaluated in the urban area of P. Faliro in Attica Basin of Greece.
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