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Why and How to Construct a Genuine Belgian Price Index of House Sales

Author

Listed:
  • A. Decoster
  • K. De Swerdt

Abstract

Assessing the price evolution of houses on the basis of average sales prices, as is current practice in Belgium, might be misleading due to changing characteristics of the houses sold in the periods observed. A hedonic index which takes into account changes in characteristics is more appropriate. We use the budget surveys of the Belgian Statistical Institute to illustrate how this applies for Belgium. The estimated hedonic price index for house sales on the secondary market is practically everywhere below the index based on average sales values. This demonstrates the need to collect more extensive data on the characteristics of the dwellings sold in Belgium.

Suggested Citation

  • A. Decoster & K. De Swerdt, 2006. "Why and How to Construct a Genuine Belgian Price Index of House Sales," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business, Review of Business and Economic Literature, vol. 0(2), pages 309-330.
  • Handle: RePEc:ete:revbec:20060205
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    Keywords

    hedonic house price index; hedonic regression; house price inflation;

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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