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Which Capital Growth for the Paris Residential Market?

Author

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  • Michel Baroni
  • Barthelemy Fabrice
  • Mokrane Mahdi

Abstract

In this paper we address the issue of measuring price performance for the Paris residential market. Our main focus is on choosing the appropriate index or indices capable of efficiently capturing capital growth, capital risk, and identifying the main risk factors inherent in this specific market. We identify three existing indices but show that they may not be completely appropriate to address our main goals. We therefore construct two complementary repeat sales indices: a Case & Shiller (1987) Weighted Repeat Sales (WRS) index and a Factorial index using the Baroni, Barth»l»my & Mokrane (2001) approach. We use the CD-BIEN database that contains more than 220 000 repeat sales transactions for residential properties in the Paris area covering the period 1983- 2001 period. We estimate these two indices for the Paris and close surrounding area and compare them to different existing indices: (i) the square metre index provided by the Chambre des Notaires de Paris and INSEE, (ii) the IPD indices, (iii) the listed real estate index. Our conclusions yield interesting implications concerning real estate risk and suggest the construction of jointly using the repeat sales and the factorial approaches.

Suggested Citation

  • Michel Baroni & Barthelemy Fabrice & Mokrane Mahdi, 2003. "Which Capital Growth for the Paris Residential Market?," ERES eres2003_111, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2003_111
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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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