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Evaluating alternative monthly house price measures for New Zealand

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This paper outlines the production of monthly house price indices (HPIs) for New Zealand produced using data from the Real Estate Institute of New Zealand (REINZ) using three alternative methodologies. The database provided by REINZ is a rich unit-record sales dataset with information on price, location, valuation, and property characteristics (such as the number of bedrooms and the floor area). We use this data to produce HPIs based on three well-established and widely adopted methodologies: 1) sales-price to appraisal ratio (SPAR); 2) hedonic regression; and 3) repeat sales. All three methods are found to produce credible-looking indices, which match the turning points and well-established cyclical properties of New Zealand’s existing house price statistics. As a benchmarking exercise, the three candidate indices are evaluated alongside a simple median and a stratified median index. Applying a range of criteria to assess index performance, we find that all three alternative candidate methodologies out-perform the simple median and the stratified median methodologies, with the SPAR method performing best.

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  • Jed Armstrong & Ashley Dunstan & Tobias Irrcher, 2017. "Evaluating alternative monthly house price measures for New Zealand," Reserve Bank of New Zealand Analytical Notes series AN2017/02, Reserve Bank of New Zealand.
  • Handle: RePEc:nzb:nzbans:2017/02
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    File URL: http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Analytical%20notes/2017/an2017-02.pdf
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    1. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-137, March.
    2. Nagaraja, Chaitra H. & Brown, Lawrence D. & Wachter, Susan M., 2010. "House Price Index Methodology," Working Papers 11-04, University of Pennsylvania, Wharton School, Weiss Center.
    3. Eurostat, 2013. "Handbook on Residential Property Prices Indices," World Bank Publications, The World Bank, number 17280, June.
    4. Arthur Grimes & Chris Young, 2010. "A Simple Repeat Sales House Price Index: Comparative Properties Under Alternative Data Generation Processes," Working Papers 10_10, Motu Economic and Public Policy Research.
    5. Bourassa, Steven C. & Hoesli, Martin & Sun, Jian, 2006. "A simple alternative house price index method," Journal of Housing Economics, Elsevier, vol. 15(1), pages 80-97, March.
    6. Nikolay Gospodinov & Serena Ng, 2013. "Commodity Prices, Convenience Yields, and Inflation," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 206-219, March.
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