Commercial Property Price Indexes and the System of National Accounts

43 Pages Posted: 16 Sep 2014 Last revised: 22 Sep 2014

See all articles by W. Erwin Diewert

W. Erwin Diewert

University of British Columbia (UBC) - Department of Economics; National Bureau of Economic Research (NBER)

Kevin J. Fox

UNSW Australia Business School, School of Economics

Chihiro Shimizu

Nihon University

Date Written: September 3, 2014

Abstract

The paper studies the problems associated with the construction of price indexes for commercial properties that could be used in the System of National Accounts. Property price indexes are required for the stocks of commercial properties in the Balance Sheets of the country. Related service price indexes for the land and structure input components of a commercial property are required in the Production Accounts of the country if the Multifactor Productivity of the Commercial Property Industry is calculated as part of the System of National accounts. The paper reviews existing methods for constructing an overall Commercial Property Price Index (CPPI) and concludes that most methods are biased (due to their neglect of depreciation) and more importantly, not able to provide separate land and structure subindexes. A class of hedonic regression models that is not subject to these problems is discussed.

Keywords: Commercial property price indexes, Net Operating Income, discounted cash flow, System of National Accounts, Balance Sheets, methods of depreciation, land and structure prices, hedonic regressions, repeat sales method

JEL Classification: C2, C23, C43, D12, E31, R21

Suggested Citation

Diewert, W. Erwin and Fox, Kevin J. and Shimizu, Chihiro, Commercial Property Price Indexes and the System of National Accounts (September 3, 2014). UNSW Business School Research Paper No. 2014-38. Available at SSRN: https://ssrn.com/abstract=2496193 or http://dx.doi.org/10.2139/ssrn.2496193

W. Erwin Diewert

University of British Columbia (UBC) - Department of Economics ( email )

997-1873 East Mall
Vancouver, BC V6T 1Z1
Canada
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National Bureau of Economic Research (NBER)

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United States

Kevin J. Fox (Contact Author)

UNSW Australia Business School, School of Economics ( email )

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Sydney, NSW 2052
Australia
(02)9385-3320 (Phone)
(02)9313-6337 (Fax)

Chihiro Shimizu

Nihon University ( email )

3-34-1, Shimouma
Tokyo, Tokyo 154-8513
Japan
+81-3-6453-1715 (Phone)
+81-3-6453-1630 (Fax)

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