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Handbook on Residential Property Price Indices

image of Handbook on Residential Property Price Indices

For most citizens, buying a residential property (dwelling) is the most important transaction during their lifetime. Residential properties represent the most significant component of households’ expenses and, at the same time, their most valuable assets. The Residential Property Prices Indices (RPPIs) are index numbers measuring the rate at which the prices of residential properties are changing over time. RPPIs are key statistics not only for citizens and households across the world, but also for economic and monetary policy makers. Among their professional uses, they serve, for example, to monitor macroeconomic imbalances and risk exposure of the financial sector.

This Handbook provides, for the first time, comprehensive guidelines for the compilation of Residential Property Price Indexes and explains in depth the methods and best practices used to calculate an RPPI. It also examines the underlying economic and statistical concepts and defines the principles guiding the methodological and practical choices for the compilation of the indices. The Handbook primarily addresses official statisticians in charge of producing residential property price indices; at the same time, it addresses the overall requirement on RPPIs by providing a harmonised methodological and practical framework to all parties interested in the compilation of such indices.

The RPPIs Handbook has been written by leading academics in index number theory and by recognised experts in RPPIs compilation. Its development has been co-ordinated by Eurostat, the statistical office of the European Union, with the collaboration of the International Labour Organization (ILO), International Monetary Fund (IMF), Organisation for Economic Co-operation and Development (OECD), United Nations Economic Commission for Europe (UNECE) and the World Bank.

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Methods Currently Used

In practice, the methods used for constructing residential property price indices can be constrained in large part by the nature of the data available. The data required to construct the target index, once defined, are not always available on a regular and timely basis, if at all. Moreover, even where suitable data are available to construct a price index to meet the needs of one set of users, more often than not, the data does not fit the requirements of another set of users. For many countries setting up the required infrastructure and procedures for the collection of the data necessary for producing a property price index can sometimes be prohibitively costly. Also, changes in methodologies and in the underlying data sources can frustrate the construction of historical series, which are often required for econometric modelling and analyses over more than one cycle of housing market developments to inform policy options for the management of the economy. Last but not least, the timeliness and frequency of the data, when available, may not be suitable for producing the kind of house price index that the users want or need.

English

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