Real estate How can micro data registers improve the

estimates of real estate in the national

accounts?

Nordisk Statistikermøde 2013

Christian Gysting

Gitte Frej Knudsen

Market value of real assets

Registers specified on individual level

Actual sales on the market

Household Wealth Project

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Main results (aggregated micro data)

Billion DKK (current prices) 2004 2005 2006 2007 2008 2009 2010

Owner occupied dwellings 2.446 2.837 3.107 3.913 4.005 3.534 3.476

Co-operative dwellings 134 152 253 228 244 228 2281

Housing assets, total 2.580 2.989 3.361 4.141 4.249 3.762 3.704

Housing assets, % of GDP 176 193 206 245 242 226 211

Household cars 132 188

Yachts 10

Aircrafts owned by households 1

Real assets, total 4.443

Note: Market values of co-operative dwellings have not yet been calculated for 2010

Share of households’ real assets

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Housing assets

95,5 percent

Household cars

4,2 percent

Yachts and aircrafts

0,3 percent

Owner occupied dwellings

Linkage of variables from four registers in DST:

Official real estate valuations

Types of property

Geographic dimensions

Real estate sales

Owners

Owner share

Aggregated micro data

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Market value at micro level:

Market value = Official real estate value * market value coefficient

Official real

estate valuation

• Real estate no.

• Official real estate valuation

• Types of property

Buildings and

land • Real estate no.

• Geographic dimensions

Real estate

sales

• Real estate no.

• Actual sale values

Owners of real

estate

• Real estate no.

• Personal ID no.

• Business register no.

• Owner share

Register with market value for owner occupied dwellings

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Estimation of market value coefficients

Relating actual sale values to official real estate valuations

k is a geographical area, e.g. a postal code

j is an owner occupied dwelling (type j),

traded in the geographical area k

J

J

kj

J

J

kj

k

1

,

1

,

) valuationestate real Official(

) valuessale(

tcoefficien ueMarket val

Market value from national accounts and aggregated micro data

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0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

2004 2005 2006 2007 2008 2009 2010

Owner occupied dwellings (aggregated micro data)

Buildings (owner occupied dwellings, national accounts)

Billion DKK

1. The calculated combined value for owner occupied dwellings (from the Household Wealth Project) is the first step if the aim is to compile complete balance sheets.

2. Calculation of additional combined values required for rented residential buildings, non-residential buildings, structures and undeveloped land.

3. Separation of the combined value into a building component and a land component. Our document suggest 2 different approaches: The residual approach and the hedonic approach.

Complete balance sheets

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• The residual approach makes use of a simple

identity: Land (L) = Total (T) – Buildings (B).

• Value of owner occupied dwellings (B) normally known

from capital stock estimations (PIM).

• Market value (combined value of land and buildings) for

owner occupied dwellings (T) known from The

Household Wealth Project.

• Probably the most used approach for valuating land

by national statistical offices. Most countries already

have PIM estimates for buildings (dwellings).

Possibility no. 1: Residual approach

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Hedonic approach makes use of a regression

model. In the most simplistic form given by:

𝑌𝑖 = 𝛽1𝑥1,𝑖 + 𝛽2𝑥2,𝑖 + 𝜀𝑖. Y

i=Actual sales price for real property, observation no. i

𝛽1 = Price per square meter of buildings,

x1,i

=Number of square meters of buildings, observation no. i,

𝛽2 = Price per square meter of land

x2,i

=Number of square meters of land, observation no. i

• Output of the regression model: Average price

per square meter of buildings (𝛽1) and average

price per square meter of land (𝛽2).

Possibility no. 2: Hedonics approach

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Residual approach:

• Consistent with Capital

Stock estimates from

The National Accounts.

• Most of the revaluation

attributed towards the

land component.

• Risk of negative values

for land.

Advantages / Disadvantages

• Hedonic approach:

• Data intensive and

technical advanced.

• Not implemented in

practice in national

accounts.

• Consistent use of market

prices and square meters

for buildings and land.

• Figures not necessary

consistent with Capital

Stock figures.

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The Household Wealth Project represents a crucial step on the road towards complete balance sheets for Denmark. Additional calculation of some components required.

The next step is to compile values for the land component. If possible, in complete consistency with already compiled values for the Capital Stock of buildings. Or if required, with adjusted values for the Capital Stock of buildings.

Our document suggests 2 methods for separating the combined value into a land component and a building component: The Residual Approach and The Hedonic Approach.

Conclusion

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