Housing Price PPP Tarun Das

8/14/2019 Housing Price PPP Tarun Das

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Housing Price Index Dr. Tarun Das 1

International BestPractices

And An OperationalHousing Price Index for

IndiaDr.Tarun Das, Eco.Adviser,

MOF


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Contents of this presentation

1. Importance of Housing/ realestate price indices

2. International best practices-

UK, USA and Canada3. Basic Housing Price Index

4. IV. An operational housing

price index for India.


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1.1 Share of dwellings in GDP

and Trends of Prices

S h a r e i n G D PS h a r e i n G D PD w e l l i n g sR e a l EC u r r . P r i c eC o n s t . P r i c eP r . I n d e xP r . I n

1 9 9 3 - 9 4 5 . 6 5 . 6 1 0 0 1 0 0

1 9 9 9 - 0 0 4 . 4 4 . 5 1 5 1 1 5 22 0 0 0 - 0 1 4 . 6 4 . 4 1 6 6 1 5 9

2 0 0 1 - 0 2 4 . 7 4 . 3 1 7 9 1 7 3

2 0 0 2 - 0 3 4 . 7 4 . 2 1 9 0 1 8 3

2 0 0 3 - 0 4 4 . 5 4 . 0 2 0 0 1 8 7


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1.2 Price Indices

D w e l l i n g s G D P C P I ( I W )W P IP r . I n d e xP r . I n d e x

1 9 9 3 - 9 4 1 0 0 1 0 0 1 0 0 1 0 0

1 9 9 9 - 0 0 1 5 1 1 5 3 1 6 6 1 4 52 0 0 0 - 0 1 1 6 6 1 5 9 1 7 2 1 5 6

2 0 0 1 - 0 2 1 7 9 1 6 4 1 7 9 1 8 1

2 0 0 2 - 0 3 1 9 0 1 7 1 1 8 7 1 6 7

2 0 0 3 - 0 4 2 0 0 1 7 6 1 9 4 1 7 4


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1.3 Trends of Price Indices

0

50

100

150

200

250

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04In

dices

(Base

199

3-

HPI FPI GPI CPI WPI


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1.4 Importance of real

state price indices Real estate prices provide major inputs for

formulation of macro-economic andmonetary policies.

Both lenders and borrowers may havelarge exposures to real estate.

Real estates constitute a major proportionof private wealth.

East Asian financial crisis in 1998-2000


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. a ax o - ousequalities for hedonic

regressionType of propertyTenure:

Number of rooms:

Number of garages

Heating type Floor size (sqft)

Age

Garden.

Land area Road charge

Location


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2.2 Seven Major HPIs in the UK

Index Data Source TypeOld ODPM SML 5% sample Mix adjustment

New ODPM SML 30-50%

sample

Mix adjustment

Land Registry 100% sales Simple average

Halifax Home loans

approved by it

Hedonic

regression

Nationwide Home loans

approved by it

Hedonic

regression

Hometrack Survey of 400estate agents

Mix adjustment

Rightmove Sellers asking

price on internet

Mix adjustment


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2.3 Seven Major HPIs in the UK

Index Weights TypeOld ODPM Rolling average of

SML transactions

Expenditure

New ODPM Rolling ave. of land

registry transaction

Expenditure

Land Registry No weights Expenditure

Halifax 1983 Halifax loan

approvals

Volume

Nationwide Rolling ave of SML,

land reg.transaction

Volume

Hometrack England and Wales

housing stock

Expenditure

Rightmove England and Wales

housing stock

Expenditure


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2.4 Weights used in UK HPIs

Transac-

tions

(Volume)

Transac-

tions

(Value)

Stocks

Value

Base

weights

Halifax Rightmove

Rolling

weights

Nationwide Old ODPM

New ODPM

LandRegistry

Hometrack

Total 2 3 2


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2.5 HPI in USA

Most popular- Index by the Office of FederalHousing Enterprise Oversight (OFHEO).

Quarterly indices for single-family homes inU.S. using mortgage transactions from theFederal Home Loan Mortgage Corporation

More than29.31 million repeat transactionsover 30 years.

Alternative HPI by the CommerceDepartment (CQHPI) covers sales of new

homes on a sample of 12,000 transactionsannually.


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2.6 HPI in Canada

In Canada, The New Housing PriceIndex (NHPI) (Base 1997) by the

Statistics Canada is a monthly series.

Measures changes over time in thecontractors' selling prices of new

residential houses.

Detailed specifications pertaining to eachhouse remain the same between two

consecutive periods.


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2.7 Alternative types of HPI

Type Advantage Drawbacks

1. Average prices Easy to collect

and calculate

Ignores quality

differences

2. Model property Avoids qualityproblems

Ignores changeover time

3. Hedonic

regression

Controls for

quality change

Requires huge

data

4.Repeat sales

method

Less data

requirements

Ignores change

over time

3 1 P i f G d


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3.1 Properties of a GoodHousing Price Index

It must conform to international bestpractices,

It must satisfy the purpose of theusers.

Data should be available with leastcost.

Index must be easy to calculate.

Easily interpreted. Easily updated at regular intervals.

Must reflect the reality.

3 2 C i f


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3.2 Constraints forconstruction of HPI

Construction of real estate prices is challenging due

to heterogeneity in real estate markets & ambiguityin prices.

Diversity and lack of standardization in real estatemarkets require collection and compilation of datafor various market segments resulting in high costand greater technical sophistication.

It is more challenging for India where no data baseexists. But, it provides opportunity for research andexperiments.

3 3 Eff t b th N ti l


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3.3 Efforts by the NationalHousing Bank (NHB)

An operational housing price index Technical Advisory Group (TAG), chaired

by the author, comprises members fromthe NHB, CSO, RBI, Labour Bureau, HDFC,

HUDCO, Dewan Housing FinanceCorporation Ltd., and the Society forDevelopment Studies.

. A Pilot Survey for Delhi

3 4 B i H i P i


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3.4 Basic Housing PriceIndex

Laspeyres Price Index is a weighted

average of indices for different types ofhouses under consideration.

PI = WI

Where PI = Price IndexW = Weights, such that W = 1n = Type of houses

I =Index for particular type of house

P = Prices of different types of houses

It = Price in time t / Base period price


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3.5 Choice of Houses First Phase- Residential houses in

urban areas with basic amenities-- Both buildings and flats

-- Both old and new for sale

Data on value, plinth area, location,age and basic characteristics ofhouses.

-- Only transactions since 2000 Second Phase- Commercial Property

Third Phase- Also include land


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3.6 Concept on prices

Which price- Actual transactionsprice (compared with registered,estate agents price, mortgageprice),

Prices per Square Feet and alsoper unit for each type.

Simple or weighted mean for a

particular type of house

A hedonic approach


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3.7 Choice of Weights

We need weights for each type ofhouses

Also weights for each zone in aregion

And for each region in the country.

Alternative weights in terms of:

-- Actual transactions

-- Nominal value and volume

-- Volume- in terms SQ.Feet (plintharea)

and number of units


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3.8 Choice of Base PeriodCPI with revised base 2001 is ready for

publication. CPI is estimated each month.

Base of WPI is being shifted to 2000-01.WPI is available for each week.

Base of National Accounts is proposed to

be shifted to 1999-2000 and works havealready started. GDP is available for eachquarter.

Base of IIP is also being shifted to 2000-01.

Base year should be a normal year andfor which all required data are available.

We like to take 2000 as the base year for


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3.9 Pilot Survey for Delhi

We are conducting a Pilot

Survey for Delhi urban area.Sample tax zones have been

selected.

Questionnaires for propertyagents, RWAs, builders havebeen prepared

Society for DevelopmentStudies is conducting thesurvey.


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3.10 Category-Wise Distribution ofColonies/Areas/Localities

Category Number AreaNumber Percent Sq.Km Percent

A 52 2.62 21.21 4.10

B 51 2.57 31.47 6.08

C 161 8.11 72.00 13.91

D 201 10.13 93.98 18.16

E 220 11.08 57.67 11.14

F 528 26.60 129.22 24.96

G 772 38.89 112.08 21.65

Total 1985 100.00 517.64 100.00


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Thank you Have a Good Day

Housing Price PPP Tarun Das

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