Property Price Index (eBook)

Preface 6
Contents 8
About the Authors 13
Part I Index Theory for Property Price Indexes 16
1 International Policy Discussion in Property Price Indices 17
1.1 Introduction 17
1.2 What Are Appropriate Target Indexes? 18
1.3 The Failure of the Traditional Matched Model Methodology in the Real Estate Context 21
1.4 Suggested Methods for Constructing Constant Quality Real Estate Price Indexes 22
1.4.1 The Repeat Sales Method 22
1.4.2 The Use of Assessment Information 24
1.4.3 Stratification Methods 32
1.4.4 Hedonic Methods 34
1.5 Other Technical Issues 36
1.5.1 The Decomposition of Real Estate Values into Land and Structure Components 36
1.5.2 Weighting and Formula Issues 38
1.5.3 The Frequency Issue and the Consistency of Quarterly with Annual Estimates 39
1.5.4 Revision Policies 39
1.5.5 The Renovations Versus Depreciation Problem 40
1.6 User Costs Versus Rental Equivalence 41
1.7 Summary and Conclusion 44
References 45
2 Theoretical Background of Hedonic Measure and Repeat Sales Measure-Survey- 49
2.1 Introduction 49
2.2 The Hedonic Price Method 50
2.2.1 The Hedonic Approach 50
2.2.2 Hedonic Approach Theory 51
2.2.3 Hedonic Market Price Function Estimation 54
2.2.4 Price Index Estimation Based on the Hedonic Approach 57
2.2.5 Hedonic Production Price Index Measurement and Quality Adjustment 64
2.2.6 Characteristics, Advantages, and Disadvantages of the Hedonic Method 68
2.3 Repeat Sales Method 70
2.3.1 Standard Repeat Sales Price Index 70
2.3.2 Random Walk Error Term 72
2.3.3 Aggregation Bias 75
2.3.4 Sample Selection Bias 80
2.3.5 Characteristics, Advantages, and Disadvantages of Repeat Sales Indexes 84
2.4 Price Indexes Based on Property Appraisal Prices 85
2.4.1 Property Appraisal Price Indexes 85
2.4.2 Hedonic Method Based on Pooling of Property Appraisal Prices And Transaction Prices 86
2.4.3 The SPAR Method 87
2.4.4 Characteristics, Advantages, and Disadvantages of Property Appraisal Price Indexes 88
2.5 Summary and Conclusion 89
References 90
Part II Empirical Studies for Property Price Indexes 93
3 A Comparison of Alternative Approaches to Measuring House Price Inflation 94
3.1 Introduction 94
3.2 Stratification Methods 96
3.3 Rolling Year Indexes and Seasonality 102
3.4 Time Dummy Hedonic Regression Models Using the Logarithm of Price as the Dependent Variable 105
3.5 Time Dummy Hedonic Regression Models Using Price as the Dependent Variable 110
3.6 Hedonic Imputation Regression Models 113
3.7 The Construction of Land and Structures Price Indexes: Preliminary Approaches 116
3.8 The Construction of Land and Structures Price Indexes: Approaches Based on Monotonicity Restrictions 122
3.9 The Construction of Land and Structures Price Indexes: An Approach Based on the Use of Exogenous Information on the Price of Structures 124
3.10 Rolling Window Hedonic Regressions 128
3.11 The Construction of Price Indexes for the Stock of Dwelling Units Using the Results of Hedonic Regressions on the Sales of Houses 131
3.12 Summary and Conclusion 135
3.13 Appendix: Tables of Values for the Figures in the Text 136
References 136
4 Estimation of Residential Property Price Index: Methodology and Data Sources 139
4.1 Introduction 139
4.2 Alternative Methods for Constructing Residential Property Price Indexes 140
4.2.1 Introduction: The Two Main Methods for Making Quality Adjustments 140
4.2.2 The Standard Hedonic Regression Model 142
4.2.3 The Standard Repeat Sales Model 143
4.2.4 Heteroskedasticity and Age Adjustments to the Repeat Sales Index 144
4.2.5 Rolling Window Hedonic Regressions: Structural Change Adjustments to the Hedonic Index 146
4.3 A Comparison of Alternative Housing Models for Tokyo 148
4.3.1 Data Description 148
4.3.2 Estimation Results 152
4.3.3 Reconciling the Differences between the Five Models 156
4.4 The Selection of Data Sources for the Construction of Housing Price Indexes 163
4.4.1 Alternative Types of Real Estate Sales Prices 163
4.4.2 Condominium Prices in the Greater Tokyo Area from Alternative Sources 166
4.4.3 The Quality Adjustment Problem 171
4.5 The Decomposition of an RPPI into Land and Structure Components 177
4.5.1 Introduction 177
4.5.2 The Tokyo Housing Data 177
4.5.3 The Basic Builder's Model 178
4.5.4 The Builder's Model with Locational Dummy Variables 181
4.5.5 The Construction of Land, Structure and Overall House Price Indexes 182
4.6 Summary and Conclusion 185
References 188
5 The System of National Accounts and Alternative Approaches to the Construction of Commercial Property Price Indexes 192
5.1 Introduction 192
5.2 The System of National Accounts and Stock and Flow Prices for Commercial Properties 195
5.3 The Builder's Model with a Single Geometric Depreciation Rate 199
5.4 The Builder's Model with Multiple Geometric Depreciation Rates 207
5.5 The Builder's Model with Multiple Straight Line Depreciation Rates 210
5.6 Smoothing the Land Price Series 212
5.7 The Use of Appraisal Prices as the Data Source in the Builder's Model 215
5.8 The Use of Land Tax Assessment Values as the Data Source 218
5.9 Overall Commercial Property Price Indexes 221
5.10 Commercial Property Price Indexes Based on Stock Market Data 225
5.11 Summary and Conclusion 226
References 228
Part III Housing Services in CPI and SNA 231
6 Measuring the Services of Durables and Owner Occupied Housing 232
6.1 Introduction 232
6.2 The Acquisitions Approach 235
6.3 The Rental Equivalence Approach 238
6.4 The User Cost Approach for Pricing the Services of a Non-housing Durable Good 241
6.5 The Opportunity Cost Approach 247
6.6 A General Model of Depreciation for Consumer Durables 248
6.7 Geometric or Declining Balance Depreciation 251
6.8 Straight Line Depreciation 253
6.9 One Hoss Shay or Light Bulb Depreciation 255
6.10 The Relationship Between User Costs and Acquisition Costs 257
6.11 Calculating User Costs for Unique Durable Goods 260
6.12 Decomposing Residential Property Prices into Land and Structure Components 262
6.13 Decomposing Condominium Sales Prices into Land and Structure Components 273
6.14 Demand Side Property Price Hedonic Regressions 280
6.15 Price Indexes for Rental Housing 286
6.16 Valuing the Services of OOH: User Cost Versus Rental Equivalence 289
6.17 The Payments Approach 295
6.18 Summary and Conclusion 298
References 302
7 New Estimates for the Price of Housing in the Japanese CPI 308
7.1 Introduction 308
7.2 The Macroeconomic Analysis of Housing Rent 311
7.2.1 Data 311
7.2.2 Aggregate Rent Indexes Using CPI Methodologies 313
7.2.3 Hedonic Estimation for Housing Rent 316
7.3 The Micro-Analysis of Rents 319
7.3.1 The Frequency of Rent Adjustments 319
7.3.2 Time-Dependent Versus State-Dependent Adjustments 322
7.4 Re-estimation of the CPI 328
7.5 Summary and Conclusion 330
References 331
8 Imputed Rent for OOH in National Account 333
8.1 Introduction 333
8.2 The Theory of Household User Costs 335
8.2.1 Basic Model of User Cost Approach 335
8.2.2 The Verbrugge Variant (VV) of the User Cost Approach 336
8.2.3 Diewert's OOH Opportunity Cost Approach 337
8.3 Empirical Analysis 343
8.3.1 Estimation Error of Imputed Rent for OOH 343
8.3.2 Data 345
8.3.3 Estimation of Rental Value and Capital Value Per Housing 349
8.3.4 Comparison of Imputed Rent of Owner-Occupied Housing in Tokyo 357
8.3.5 Capital Gain 359
8.3.6 Comparison of Estimated User Costs 361
8.4 Summary and Conclusion 364
References 366
Index 367