Disaggregated House Price Indices

45 Pages Posted: 23 Mar 2013

See all articles by Adam Wenqiang Shao

Adam Wenqiang Shao

University of New South Wales - ARC Centre of Excellence in Population Ageing Research (CEPAR); Milliman

Michael Sherris

University of New South Wales - ARC Centre of Excellence in Population Ageing Research and School of Risk and Actuarial Studies; UNSW Australia Business School

Katja Hanewald

UNSW Sydney - School of Risk & Actuarial Studies and ARC Centre of Excellence in Population Ageing Research (CEPAR)

Date Written: March 22, 2013

Abstract

This paper estimates and compares methods of constructing disaggregated house price indices from existing house price models using individual sales data for Sydney. Nine alternative house price models are selected to cover the most frequently used methods in the literature: the mean model, median models (standard and stratified), hedonic models (restricted and unrestricted hedonic), repeat-sales models (age-adjusted and Case-Shiller weighted), and a hybrid of the hedonic and repeat-sales model. The unrestricted hedonic model and the hybrid model have an advantage over the other seven models in that they do not require stratification of the data for estimating disaggregated indices. Both models employ the whole sample to estimate implicit prices of house characteristics that are used to construct disaggregated house price indices. These two models eliminate variability arising from small sample sizes and provide more efficient estimates of house price heterogeneity. In addition, house characteristics that are important drivers of the variability of individual house prices are identified in the two models. Disaggregated indices constructed from these two models provide more accurate comparisons with an aggregate house price index. We quantify the extent to which disaggregated house prices indices have significantly more variability than, and differing trends from, the aggregate index.

Keywords: disaggregated house price index, hedonic models, repeat-sales models, hybrid models

JEL Classification: C31, C43, G21, R31, R32

Suggested Citation

Shao, Adam Wenqiang and Sherris, Michael and Hanewald, Katja, Disaggregated House Price Indices (March 22, 2013). UNSW Australian School of Business Research Paper No. 2013ACTL09. Available at SSRN: https://ssrn.com/abstract=2237783 or http://dx.doi.org/10.2139/ssrn.2237783

Adam Wenqiang Shao (Contact Author)

University of New South Wales - ARC Centre of Excellence in Population Ageing Research (CEPAR) ( email )

CEPAR, Level 3
East Wing, NICTA Building, UNSW
Sydney, New South Wales NSW 2052
Australia

Milliman ( email )

One Pennsylvania Plaza 38th Floor
New York, NY 10119
United States

Michael Sherris

University of New South Wales - ARC Centre of Excellence in Population Ageing Research and School of Risk and Actuarial Studies ( email )

UNSW Business School
Risk and Actuarial Studies
Sydney, NSW 2052
Australia
+61 2 9385 2333 (Phone)
+61 2 9385 1883 (Fax)

HOME PAGE: http://www.asb.unsw.edu.au/schools/Pages/MichaelSherris.aspx

UNSW Australia Business School ( email )

Sydney, NSW 2052
Australia

Katja Hanewald

UNSW Sydney - School of Risk & Actuarial Studies and ARC Centre of Excellence in Population Ageing Research (CEPAR) ( email )

School of Risk & Actuarial Studies
UNSW Sydney
Sydney, New South Wales NSW 2052
Australia

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