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Alternative Approaches to Commercial Property Price Indexes for Tokyo

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  • Diewert, Erwin
  • Shimizu, Chihiro

Abstract

The paper studies the problems associated with the construction of price indexes for commercial properties that could be used in the System of National Accounts. Property price indexes are required for the stocks of commercial properties in the Balance Sheets of the country and related price indexes for the land and structure components of a commercial property are required in the Balance Sheet accounts of the country for the calculation of the Multifactor Productivity of the Commercial Property Industry. The paper uses a variant of the builder’s model that has been used to construct Residential Property Price Indexes. Geometric depreciation rates are estimated for commercial offices in Tokyo using assessment data for REITs. The problems associated with the decomposition of asset value into land and structure components are addressed. The problems associated with depreciating capital expenditures on buildings and with measuring the loss of asset value due to early retirement of the structure are also addressed.

Suggested Citation

  • Diewert, Erwin & Shimizu, Chihiro, 2014. "Alternative Approaches to Commercial Property Price Indexes for Tokyo," Economics working papers erwin_diewert-2014-34, Vancouver School of Economics, revised 14 Jul 2014.
  • Handle: RePEc:ubc:bricol:erwin_diewert-2014-34
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    File URL: http://www.economics.ubc.ca/files/2014/07/pdf_paper_erwin-diewert-14-08-commercial-property.pdf
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    References listed on IDEAS

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    1. W. Erwin Diewert & Kevin J. Fox, 2016. "Sunk costs and the measurement of commercial property depreciation," Canadian Journal of Economics, Canadian Economics Association, vol. 49(4), pages 1340-1366, November.
    2. Taltavull Paloma & Kauko Tom & d'Amato Maurizio, 2009. "Mass Appraisal Methods: An International Perspective for Property Valuers," International Journal of Strategic Property Management, Sciendo, vol. 13(4), pages 359-364, December.
    3. Paul Schreyer, 2001. "The OECD Productivity Manual: A Guide to the Measurement of Industry-Level and Aggregate Productivity," International Productivity Monitor, Centre for the Study of Living Standards, vol. 2, pages 37-51, Spring.
    4. Neil Crosby & Steven Devaney & Vicki Law, 2012. "Rental depreciation and capital expenditure in the UK commercial real estate market, 1993--2009," Journal of Property Research, Taylor & Francis Journals, vol. 29(3), pages 227-246, March.
    5. Diewert, Erwin & Shimizu, Chihiro, 2015. "Residential Property Price Indices For Tokyo," Macroeconomic Dynamics, Cambridge University Press, vol. 19(08), pages 1659-1714, December.
    6. Gatzlaff Dean H. & Ling David C., 1994. "Measuring Changes in Local House Prices: An Empirical Investigation of Alternative Methodologies," Journal of Urban Economics, Elsevier, vol. 35(2), pages 221-244, March.
    7. Davis, Morris A. & Heathcote, Jonathan, 2007. "The price and quantity of residential land in the United States," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2595-2620, November.
    8. Raphael W. Bostic & Stanley D. Longhofer & Christian L. Redfearn, 2007. "Land Leverage: Decomposing Home Price Dynamics," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 35(2), pages 183-208, June.
    9. Gyourko, Joseph & Saiz, Albert, 2004. "Reinvestment in the housing stock: the role of construction costs and the supply side," Journal of Urban Economics, Elsevier, vol. 55(2), pages 238-256, March.
    10. Clapp, John M & Giaccotto, Carmelo, 1992. "Estimating Price Trends for Residential Property: A Comparison of Repeat Sales and Assessed Value Methods," The Journal of Real Estate Finance and Economics, Springer, vol. 5(4), pages 357-374, December.
    11. Clapp, John M., 1980. "The elasticity of substitution for land: The effects of measurement errors," Journal of Urban Economics, Elsevier, vol. 8(2), pages 255-263, September.
    12. Marc K. Francke & Gerjan A. Vos, 2004. "The Hierarchical Trend Model for Property Valuation and Local Price Indices," The Journal of Real Estate Finance and Economics, Springer, vol. 28(2_3), pages 179-208, March.
    13. W. Erwin Diewert, 2005. "Issues in the Measurement of Capital Services, Depreciation, Asset Price Changes, and Interest Rates," NBER Chapters,in: Measuring Capital in the New Economy, pages 479-556 National Bureau of Economic Research, Inc.
    14. Shimizu Chihiro & Nishimura Kiyohiko G. & Watanabe Tsutomu, 2010. "Housing Prices in Tokyo: A Comparison of Hedonic and Repeat Sales Measures," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(6), pages 792-813, December.
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    Citations

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    Cited by:

    1. Chihiro Shimizu & W. Erwin Diewert & Kiyohiko G. Nishimura & Tsutomu Watanabe, 2015. "Estimating quality adjusted commercial property price indexes using Japanese REIT data," Journal of Property Research, Taylor & Francis Journals, vol. 32(3), pages 217-239, September.
    2. Diewert, Erwin & Shimizu, Chihiro, 2017. "Alternative Land Price Indexes for Commercial Properties in Tokyo," HIT-REFINED Working Paper Series 75, Institute of Economic Research, Hitotsubashi University.
    3. Diewert, W. Erwin & Imai, Satoshi & Shimizu, Chihiro, 2015. "New Estimates for the Price of Housing in the Japanese CPI," Economics working papers erwin_diewert-2015-14, Vancouver School of Economics, revised 17 Jul 2015.
    4. repec:spr:ediscc:v:2:y:2018:i:1:d:10.1007_s41885-017-0019-9 is not listed on IDEAS
    5. W. Erwin Diewert & Kevin J. Fox & Chihiro Shimizu, 2016. "Commercial Property Price Indexes And The System Of National Accounts," Journal of Economic Surveys, Wiley Blackwell, vol. 30(5), pages 913-943, December.
    6. Levente Timar & Arthur Grimes & Richard Fabling, 2015. "Before a Fall: Impacts of Earthquake Regulation and Building Codes on the Commercial Building Market," Working Papers 15_19, Motu Economic and Public Policy Research.

    More about this item

    Keywords

    Commercial property price indexes; System of National Accounts; Balance Sheets; methods of depreciation; land and structure price indexes; demolition;

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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