Estimation of the value of real estate

« Banking institutions provide loans to individuals to help them acquire their primary residence or any other type of real estate. These loans are granted based on various criteria, including the value of the property. In order to provide this service, LCL, a bank, has decided to develop a statistical method that can accurately estimate the value of real estate. This value is important to verify the accuracy of the information provided by the customer and to measure the risk incurred by the bank.

Therefore, through this project, LCL will be able to ensure that in the event of a customer default, the property mortgage will cover provisioning. This will be used for various regulatory exercises following the new standards. In fact, this estimated value will be considered in the calculation of Risk-Weighted Assets (RWA). RWAs are an estimate of risk that determines the minimum level of regulatory capital a bank must maintain to cover unexpected losses.

The objective of the project is to identify statistical methods that can be employed to accurately estimate the value of a property.

The project aims to address the question of how to effectively estimate the value of a property, taking into consideration both its physical characteristics and geographical features.

The project comprises several stages, starting with a comprehensive literature review to provide an overview of the various authors who have studied the subject and the statistical methods used. This will be followed by database processing and preliminary analysis. Based on the findings of the literature review, a selection of statistical method(s) will be chosen for implementation. The project will conclude with the interpretation of results and the drawing of conclusions. »