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Improved Price Index for Condominiums

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  • Han-Suck Song
  • Mats Wilhelmsson

Abstract

This paper proposes a price index construction methodology that can increase the quality of price index data for condominiums in Sweden. Currently, officially published market price indexes for condominiums and houses in Sweden suffer from a number of shortcomings. Notably they do not control for quality, and they are based on dates when transfer of ownership of the home occurs, and not the contract date. Market coverage is yet another area that may cause problems for index construction, especially during times when the number of transactions is low, and when there exist a large number of brokers ñ the primary suppliers of data ñ that do not feed the system with sales information. We describe a new price index that controls for quality and reflect most recent price levels and changes. We also discuss the efforts we undertake in order to increase market coverage. With access to a unique database we estimate a price index with the improved methodology, and contrasts it to commonly used average price indexes. Naturally, there is a trade-off between control of quality, access to the most recent transactions, and market coverage on one hand, and ease of construction on the other hand. Therefore we also discuss current limitations of the improved methodology and how they may be solved in the future, such as problems with model specification with respect to different local market conditions, changing relationships over time, and the difficulty of obtaining attributes. Finally we discuss the potential value of an improved price index for the establishment of risk management instruments such as insurance and derivatives products for the housing market.

Suggested Citation

  • Han-Suck Song & Mats Wilhelmsson, 2009. "Improved Price Index for Condominiums," ERES eres2009_192, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2009_192
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    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2009-192
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    1. Diewert, Erwin, 2007. "The Paris OECD-IMF Workshop on Real Estate Price Indexes: Conclusions and Future Directions," Economics working papers diewert-07-01-03-08-12-12, Vancouver School of Economics, revised 31 Jan 2007.
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    Cited by:

    1. Wilhelmsson, Mats & Ceccato, Vania & Gerell, Manne, 2021. "What effect does gun-related violence have on the attractiveness of a residential area? The case of Stockholm, Sweden," Working Paper Series 21/2, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    2. Gjestland, Arnstein & McArthur, David Philip & Osland, Liv & Thorsen, Inge, 2014. "The suitability of hedonic models for cost-benefit analysis: Evidence from commuting flows," Transportation Research Part A: Policy and Practice, Elsevier, vol. 61(C), pages 136-151.
    3. Mats Wilhelmsson & Jianyu Zhao, 2018. "Risk Assessment of Housing Market Segments: The Lender’s Perspective," JRFM, MDPI, vol. 11(4), pages 1-22, October.

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    More about this item

    JEL classification:

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

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