housing price ppp tarun das
TRANSCRIPT
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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