Housing price indices for small areas

The idea of creating indices of housing price has a long history, but it is still a current issue. Numerous works of literature suggest that the discussion about the determination of such indices is still lively. Among others, professor Robert Shiller (Nobel laureate of 2013) indicates a problem of homogeneity of the data used for the construction of price indices. He suggests a two-stage construction of indices. The first step is the construction of housing prices for homogeneous areas, for example by level of urbanization and population. Based on those the second step is the construction of aggregated price indices for larger areas. The basis of this concept is the definition of a typical house, which is a constant point of reference in subsequent periods of study.

The article deals with the subject of creating housing price indices, taking into account the aforementioned concept. An overview of methods and experiences was conducted for selected countries that construct indices of housing prices, including the US market. Against this background, the actions undertaken in Poland were evaluated. For the example of the local market and defined typical house, a hypothesis on the quality of the housing price index in the local market and the regional index was verified.

The discussion indicated in the article is up to date due to the economic cycle on the real estate market and the decisions made by investors, who follow the trends arising from changes in price indices. At the same time, it is a significant problem for the Polish market, where property price indices, in accordance with the Real Estate Management Act, are to be determined by the Central Statistical Office. The results obtained for the residential market are a contribution to further research on other local markets and for other types of property.