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Overview of the family of property
price indices and their importance
Lunchtime seminar: Measuring Property Prices,
UNSC, New York Tuesday February 23. 2010
Olav Ljones
Deputy Director General, Statistics Norway
olj@ssb.no
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1. Introduction
• We discuss statistics on dwellings (flats and houses)
• Both new and old houses
• Some are tenants and some live in owner occupied houses
• Each dwelling is unique
• The yearly turnover is small compared to all existing units
• Market prices, assessment prices and taxes and fees.
• Dwellings are expensive compared to yearly household
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revenue
Durable consumer good
Disitinction between the house price and the price of the
service received
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2. Economic statistics and national accounts.
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1945 – 2010 From the core of the real economy to bubbles and financial
markets.
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Construction industry is a part of NA. The industrial classification gives
activity (or process detail) but do not include a distinction between
commercial buildings and dwellings. Two types of indices: Input price
indices and Output price index (Hedonic) for new dwellings
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Deflation indexes for the construction industries are based on input price
indices and the price index for new detached houses
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The dwellings are assumed to produce services to the household – both
rented and owner occupied.
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From user cost to the rental equivalent method based on observed
rents. Common solution with CPI
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3. Sector Statistics - New Houses
• Input price index; to describe the changes in cost
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components. Such indexes may be based on data for
materials, manpower, plant and equipment, transport,
energy and other cost. Such indices are often used to
regulate construction contracts
Output price indices; producer price indices for the
construction industry
need methods that corrects for changes in quality - like
hedonic methods
Separate indices may be constructed for the different types
of houses like detached houses, houses with several
dwellings and multi dwelling houses.
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4. Used houses, residential property price
indices (RPPI)
• Data and proper statistical methods are challenges for
these indices.
• Hedonic methods or if available repeated sales (same
house) are the methods that are most common
• May be produced outside the family of official statistics, by
private agents associations etc.
• In Norway, the purchaser price and data about quality
characteristics are from an internet market for houses
(www.finn.no.) In addition we add complementally
information about housing characteristics from the cadastre
• The hedonic method is rather crude
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5. Cost of living and residential prices
• The proportion of owner occupied houses
• Durable consumer goods, 3 potential methods
– acquisition,
– user cost
– rental equivalence imputes a price (value) on the service by using
the corresponding market rental for a similar dwelling. House prices
not included but indirectly rental price.
• The international recommendations – not clear
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6. Inflation, monetary policy and house prices
• Monetary policy with inflation targets
• Target is defined based on the CPI
• The forward looking perspective is interpreted
in a way
that has led Statistics Norway to publish a CPI adjusted for
indirect taxes and energy prices
• Active critical debate about
what kind of inflation indicator
that is the best. Alternative methods for inclusion of house
prices are discussed.
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7. Household wealth, taxation
• Housing stock
will in most countries be an important part of
the households wealth
• Problem: How to measure the price – wealth?
• Norway: Statistcis Norway give data/statistics input for a
wealth calculator
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8. Financial stability and housing market
• A strong link between house prices and financial stability.
• Bubbles on housing markets will create shocks into the
financial market when the bubbles burst
• Statistics may
be used for improved indiactors
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9. Independent indicators and non official
statistics
• Indices and information about changes in house prices may
be produced outside the national statistical office
• Sensitive area and important to follow accepted quality
criteria
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10. Concluding remarks
• The NSI has to take on board the several uses
• Consistency through the full system of official statistics
• Observation: A lack of a basic classification systems for
houses, dwellings and quality criteria. How to measure the
size of the dwelling and eventually how to include land
(size). There will also be several possible definition of the
price. A full program has to include the classifications and
concepts.
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Thank you for your attention
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