Comparison of heat maps showing residence price generated using interpolation methods

Sammanfattning: In this report we attempt to provide insights in how interpolation can be used for creating heat maps showing residence prices for different residence markets in Sweden. More specifically, three interpolation methods are implemented and are then used on three Swedish residence markets. These three residence markets are of varying characteristics such as size and residence type. Data of residence sales and the physical definitions of the residence markets were collected. As residence sales are never identical, residence sales were preprocessed to make them comparable. For comparison, a so-called external predictor was used as an extra parameter for the interpolation method. In this report, distance to nearest public transportation was used as an external predictor. The interpolated heat maps were compared and evaluated using both quantitative and qualitative approaches. Results show that each interpolation method has its own strengths and weaknesses, and that using an external predictor results in better heat maps compared to only using residence price as predictor. Kriging was found to be the most robust method and consistently resulted in the best interpolated heat maps for all residence markets. On the other hand, it was also the most time-consuming interpolation method.