Can Geospatial Data Improve House Price Indexes? A Hedonic Imputation Approach with Splines

Determining how and when to use geospatial data (i.e. longitudes and latitudes for each house) is probably the most pressing open question in the house price index literature. This issue is particularly timely for national statistical institutes (NSIs) in the European Union, which are now required b...

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Bibliographic Details
Published inThe Review of income and wealth Vol. 64; no. 4; pp. 737 - 756
Main Authors Hill, Robert J., Scholz, Michael
Format Journal Article
LanguageEnglish
Published Oxford Blackwell Publishing Ltd 01.12.2018
Subjects
Data analysis
Economic models
Economic theory
geospatial spline surface
Good news
house price measurement
housing market
Housing prices
Indexes
Institutes
News
Price indexes
quality adjustment
semiparametric hedonic model
Spatial data
Europe
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Summary:Determining how and when to use geospatial data (i.e. longitudes and latitudes for each house) is probably the most pressing open question in the house price index literature. This issue is particularly timely for national statistical institutes (NSIs) in the European Union, which are now required by Eurostat to produce official house price indexes. Our solution combines the hedonic imputation method with a flexible hedonic model that captures geospatial data using a non‐parametric spline surface. For Sydney, Australia, we find that the extra precision provided by geospatial data as compared with postcode dummies has only a marginal impact on the resulting hedonic price index. This is good news for resource‐stretched NSIs. At least for Sydney, postcodes seem to be sufficient to control for locational effects in a hedonic house price index.
Bibliography:This project has benefited from funding from the Austrian National Bank (Jubiläumsfondsprojekt 14947). We thank Australian Property Monitors for supplying the data. We also thank participants at the following conferences for their comments: the ICP/PPP workshop at Princeton University (May 2013), the Ottawa Group meeting in Copenhagen (May 2013), the UNSW Economic Measurement Group (EMG) workshop in Sydney (November 2013), the University of Queensland workshop on Housing Markets and Residential Property Price Indexes in Brisbane (December 2013), the OECD workshop on House Price Statistics in Paris (March 2014), the Society for Economic Measurement conference at University of Chicago (August 2014), the Austrian National Bank workshop “Are House Prices Endangering Financial Stability? If So, How Can We Counteract This?” in Vienna (October 2014), and the 23rd European Real Estate Society Annual Conference in Regensburg (June 2016).
Note
ISSN:0034-6586
1475-4991
DOI:10.1111/roiw.12303