A key factor in understanding the global recession is an understanding of the why house price indices (HPIs) fluctuate both over time and between countries. While economic fundamentals naturally have a major bearing, between-country variation in HPI changes may also be determined by variation in the methodology used to construct the HPIs. Key HPI methodological issues include: (i) the use of stocks or flows and values or quantities for weights; (ii) method of enabling constant quality measures (repeat sales pricing, hedonic approach, mix-adjustment through stratification, sale price appraisal ratio (SPAR), and the standard 'model' portfolio approach); (iii) coverage in terms of geography (capital city, urban etc.), type of housing (single family house, apartment etc.), and financing (confined to sales using mortgages from particular lenders); and (iv) valuation method of prices (asking, transaction, appraisal etc.). The paper outlines such issues and reports on empirical work to estimate the effects of such measurement issues on house price indexes.
Keywords: Residential property price index; House price index; Index numbers
Biography: Currently Senior Economist, IMF's Statistics Department; previously Professor of Economic Statistics and Head of the Quantitative Analysis Group at Cardiff University; and ASA/NSF Senior Research Fellow at US Bureau of Labor Statistics. Research interests are mainly on index numbers on which he has published extensively in books and academic journals. He contributed several chapters to the ILO Consumer Price Index Manual and IMF Producer Price Index Manual, the 2008 SNA, the World Bank's ICP Handbook, and is editor of, and contributor to, the IMF Export and Import Price Index Manual. He acted as a long-time consultant to the U.K. Office for National Statistics as well as many international organisations. Has been a long-serving member of the UN Ottawa Group and member (and chair) of the Inter-Secretariat Working Group on Price Statistics. Serves on the World Bank's ICP Technical Expert Group and Statistics Canada's Price Measurement Advisory Committee.