Front Matter

Front Matter

Author(s):
Statistical Office of the European Communities;International Labour Office;International Monetary Fund;Organization for Economic Co-operation and Development;United Nations;World Bank
Published Date:
May 2013
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    Luxembourg: Publications Office of the European Union, 2013

    ISBN 978-92-79-25984-5

    doi:10.2785/34007

    Cat. No KS-RA-12-022-EN-N

    Theme: Economy and finance

    Collection: Methodologies & Working papers

    © European Union, International Labour Organization, International Monetary Fund, Organisation for Economic Co-operation and Development, United Nations Economic Commission for Europe, The World Bank, 2013 Reproduction is authorised provided the source is acknowledged.

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    Printed in Belgium

    PRINTED ON ELEMENTAL CHLORINE-FREE BLEACHED PAPER(ECF)

    Also available under the title Handbook on Residential Property Prices Indices (RPPIs),

    ILO

    ISBN 978-92-2-127359-2 (paperback)

    ISBN 978-92-2-127360-8 (PDF)

    OECD

    ISBN 978-92-6-419718-3 (PDF)

    The opinions expressed and arguments employed herein do not necessarily reflect the official views of the ILO, IMF, OECD, UNECE, the World Bank or of the governments of their member countries or those of Eurostat or the European Commission.

    Table of contents

    Foreword - RPPI

    This Handbook on Residential Property Prices Indices (RPPIs) represents the first comprehensive overview of conceptual and practical issues related to the compilation of price indexes for residential properties.

    The development of the RPPI Handbook has been co-ordinated by the Statistical Office of the European Union (Eurostat), under the joint responsibility of six organizations - International Labour Organization (ILO), International Monetary Fund (IMF), Organisation for Economic Co-operation and Development (OECD), Statistical Office of the European Union (Eurostat), United Nations Economic Commission for Europe (UNECE) and World Bank - through the mechanism of an Inter-Secretariat Working Group on Price Statistics (IWGPS). The Handbook is published jointly by these organizations.

    The aim of the RPPI Handbook is to give practical guidance on the compilation of house price indexes and to increase international comparability of residential property price indexes. The Handbook outlines the different user needs, gives details on data needs and methods, and provides recommendations. The primary purpose of the Handbook is to assist producers of residential property price indexes, particularly in countries that are revising or setting up their RPPIs. The Handbook draws on a wide range of experience and expertise in an attempt to describe practical and suitable measurement methods. It should also help countries to produce their RPPIs in a more comparable manner. As it brings together a large body of knowledge on the subject, the Handbook may be used for self-learning, or as a teaching tool for training courses on residential property price indexes.

    Other RPPI users, such as businesses, policy-makers or researchers may also find the Handbook useful as a source of information, not only about the different methods that are employed in collecting data and compiling such indexes, but also about their limitations. In this respect, it may facilitate the interpretation of the results.

    The drafting and revision have entailed many meetings over a three-year period, in which RPPI experts from national statistical offices, international and regional organisations, universities and research institutes have participated. Their collective advice and wisdom were indispensable for the compilation of this Handbook. An electronic version of the Handbook is available on the Internet at http://epp.eurostat.ec.europa.eu. The IWGPS views the Handbook as a “living document” that will be amended and updated to address particular points in more detail.

    Comments on the Handbook are welcomed by the IWGPS, and should be sent to Eurostat (e-mail: ESTAT-hicp-methods@ec.europa.eu). They will be taken into account in any future revisions.

    Walter Radermacher

    Chief Statistician of the European Union

    Director General

    Eurostat - Statistical Office of the European Union

    Alfredo M. Leone

    Acting Director

    Statistics Department

    International Monetary Fund

    Lidia Bratanova

    Director of Statistical Division

    United Nations Economic Commission for Europe

    Rafael Diez de Medina

    Chief Statistician

    Director of the Department of Statistics

    International Labour Organisation

    Martine Durand

    Chief Statistician

    Director of Statistics Directorate

    Organisation for Economic Co-operation and Development

    Shaida Badiee

    Director, Development Data Group

    World Bank

    Preface

    Introduction

    The aim of this Handbook is to facilitate the setting-up of residential property price indices in countries where these are still missing and the improvement of existing price indices where this is deemed necessary. It is designed to give practical guidance on the compilation of house price indices, both in developed and less developed countries, and to increase international comparability of residential property price indices. It explains the different user needs, gives details on data and methods that can be used to compile residential property price indices and provides recommendations. The production of the Handbook was funded and supported by Eurostat.

    Background

    The need for property price indices that are fit-for-purpose was recognised at a conference organised jointly by the International Monetary Fund (IMF) and the Bank for International Settlements (BIS) in Washington DC, October 2003. As a result, a chapter on residential property price indices was added to the IMF’s “Compilation Guide of Financial Soundness Indicators”. The idea of a more detailed Handbook dates back to a workshop organised by the Organisation for Economic Co-operation and Development (OECD) and the IMF on Real Estate Price Indices in Paris, November 2006. The Handbook would complement the existing international manuals on consumer price indices, producer price indices and import-export price indices that were produced under the auspices of the Inter-Secretariat Working Group on Price Statistics.

    Eurostat agreed to take this initiative forward by supporting and funding the preparation of the Handbook, given the strong links to its ongoing work on the inclusion of owner-occupied housing in the Harmonized Index of Consumer Prices (HICP) and the role that house price indices have in the set of “Principal European Economic Indicators”.

    At the Eurostat-IAOS-IFC conference on residential property price indices, held in Basel, 11-12 November 2009, the Handbook plan was discussed. Preliminary versions of the Handbook were presented and discussed at several occasions, in particular at the UNECE-ILO Meeting on Consumer Price Indices in Geneva, 10-12 May 2010, a workshop held in The Hague, 10-11 February 2011, and the twelfth Ottawa Group meeting in Wellington, 4-6 May 2011.

    A Guide to Readers

    Although not all of the chapters are self-contained, the Handbook is not designed to be read from cover to cover. For example, some of the chapters can easily be skipped by compilers who are particularly interested in methodological issues. Further details on the contents of the Handbook are given in Chapter 1.

    The Handbook cannot be too prescriptive for two reasons. Firstly, it is not always possible to give practical guidance as some of the solutions to conceptual problems are not always clear-cut and there are choices to be made about precisely how a practical solution is implemented. Secondly, what is applicable and what can be achieved will depend on the data and resources available to the individual national statistical institute (or other compiling institute).

    Acknowledgements

    The writing of the Handbook was led by Statistics Netherlands; Bert M. Balk co-ordinated the project activities. Jan de Haan and W. Erwin Diewert acted as main editors. The authors of the individual chapters are as follows:

    Preface Bert Balk, Jan de Haan and David Fenwick

    1. Introduction Bert Balk

    2. Uses of Residential Property Price Indices David Fenwick

    3. Elements for a Conceptual Framework Erwin Diewert

    4. Stratification or Mix Adjustment Methods Jan de Haan and Erwin Diewert

    5. Hedonic Regression Methods Jan de Haan and Erwin Diewert

    6. Repeat Sales Methods Jan de Haan

    7. Appraisal-Based Methods Jan de Haan

    8. Decomposing an RPPI into Land and Structures Components Erwin Diewert

    9. Data Sources David Fenwick

    10. Methods Currently Used David Fenwick

    11. Empirical Examples Marc Prud’homme and Erwin Diewert

    12. Recommendations David Fenwick, Erwin Diewert and Jan de Haan

    Glossary Jan de Haan

    The quality of the Handbook was increased by the valuable contributions of many individuals and organisations, including input from both compilers and users of residential property price indices in different parts of the world. The number of contributors is, of course, too great to mention them all by name.

    The BIS (and in particular Paul Van den Bergh) have been excellent hosts for the Basel workshop in 2009. Many thanks go to UNECE (and in particular Carsten Boldsen) who were also heavily involved in the organisation of the Basel workshop, and of the special session on the RPPI Handbook during the joint UNECE/ILO CPI meeting in 2010.

    Special thanks are due to Irmtraud Beuerlein, Simon Coté, Lee Everts, Gregory Klump, Jose Vicente Romero, Patrick Sabourin, A.P. Saxena, and Chihiro Shimizu for contributing to the country-based case studies and to Emily Carless, Preechaya Chavalittumrony, Ali Hepşen, Marissa Gonzalez Guzman and Hector Zarate, who provided other background information on published indices. Useful comments on preliminary drafts of the Handbook were received from Carlos Brás, Morris Davis, Martin Eiglsperger, Timothy Erickson, Rui Evangelista, Dennis Fixler, John Greenlees, Brian Graf, Vanda Guerreiro, Ronald Johnson, Marcel van Kints, Andrew Leventis, Bogdan Marola, Daniel Santos, Mick Silver, Leo Sveidkauskas, Randall Verbrugge, David Wasshausen, and participants at the workshop in The Hague, in particular Marc Francke and Jan Walschots. Eurostat, the BIS, the IMF and the ECB also provided helpful comments. Thanks are also due to Rens Hendriks and Ning Huang for comments and computational assistance.

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