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A hedonic house price index in continuous time

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  • Sofie R. Waltl

Abstract

Purpose - This paper aims to develop a methodology to accurately and timely measure movements in housing markets by constructing a continuously estimated house price index. Design/methodology/approach - The continuous index, which is extracted from an additive model that includes the temporal and the locational effects as smooth functions, can be interpreted as an extension of the classical hedonic time-dummy method. The methodology is applied to housing sales from Sydney, Australia, between 2001 and 2011, and compared to three types of discrete indexes. Findings - Discrete indexes turn out to approach the continuously estimated index with decreasing period lengths but eventually become wiggly and unreliable because of fewer observations per period. The continuous index, in contrast, is stable, has favourable robustness properties and is more objective in several ways. Originality/value - The resulting index tracks movements in the housing market precisely and in “real-time” and is hence suited for monitoring and assessing housing markets. Because turbulence in housing markets is often a harbinger of financial crises, such monitoring tools support policymakers and investors in tailoring their decisions and reactions. Additionally, the index can be evaluated arbitrarily frequently and therefore is well suited for use in property derivatives.

Suggested Citation

  • Sofie R. Waltl, 2016. "A hedonic house price index in continuous time," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 9(4), pages 648-670, October.
  • Handle: RePEc:eme:ijhmap:v:9:y:2016:i:4:p:648-670
    DOI: 10.1108/IJHMA-10-2015-0066
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    Citations

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    Cited by:

    1. Hahn, Anja M. & Kholodilin, Konstantin A. & Waltl, Sofie R., 2020. "Forward to the Past: Short-Term Effects of the Rent Freeze in Berlin," Department of Economics Working Paper Series 308, WU Vienna University of Economics and Business.
    2. Kholodilin, Konstantin A. & Limonov, Leonid E. & Waltl, Sofie R., 2021. "Housing rent dynamics and rent regulation in St. Petersburg (1880–1917)," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 81.
    3. Lepinteur, Anthony & Waltl, Sofie R., 2020. "Tracking Owners' Sentiments: Subjective Home Values, Expectations and House Price Dynamics," Department of Economics Working Paper Series 299, WU Vienna University of Economics and Business.
    4. N. Denisa Naidin & Sofie R. Waltl & Michael H. Ziegelmeyer, 2022. "Objectified Housing Sales and Rent Prices in Representative Household Surveys: the Impact on Macroeconomic Statistics," BCL working papers 160, Central Bank of Luxembourg.
    5. Julian Granna & Wolfgang Brunauer & Stefan Lang, 2022. "Proposing a global model to manage the bias-variance tradeoff in the context of hedonic house price models," Working Papers 2022-12, Faculty of Economics and Statistics, Universität Innsbruck.
    6. Trojanek, Radoslaw & Gluszak, Michal, 2022. "Short-run impact of the Ukrainian refugee crisis on the housing market in Poland," Finance Research Letters, Elsevier, vol. 50(C).
    7. Waltl, Sofie R., 2018. "Estimating quantile-specific rental yields for residential housing in Sydney," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 204-225.

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