Main Article Content
Research background: There are several methods to construct a price index for infrequently traded real estate assets (mainly residential, but also office and land). The main concern to construct a valid and unbiased price index is to address the problem of heterogeneity of real estate or put differently to control for both observable and unobservable quality attributes. The one most frequently used is probably the hedonic regression methodology (classic, but recently also spatial and quantile regression). An alternative approach to control for unobservable differences in assets’ quality is provided by repeat sales methodology, where price changes are tracked based on differences in prices of given asset sold twice (or multiple times) within the study period. The latter approach is applied in renown S&P CoreLogic Case-Shiller house price indices.
Purpose of the article: The goal of the paper is to assess the applicability of repeat sales methodology for a major housing market in Poland. Previous studies used the hedonic methodology or mix adjustment techniques, and applied for major metropolitan areas. The most widely known example is the set of quarterly house price indices constructed by NBP — especially for the primary and secondary market. The repeat sales methodology has not been adopted with significant success to date — mainly because of concern regarding relative infrequency of transactions on the housing market in most metropolitan areas (thus a potentially small sample of repeated sales).
Methods: The study uses data on repeat sales of residential transactions in Krakow from 2003 to 2015. We apply different specifications of repeat sales index construction and compare respective values to the hedonic price index for Krakow estimated by NBP.
Findings & Value added: Findings suggest that repeat sales house sales indices can be used to track price dynamics for major metropolitan areas in Poland. The study suggests problems that need to be addressed in order to get unbiased results — mainly data collection mechanism and estimation procedure.
This work is licensed under a Creative Commons Attribution 4.0 International License.
Balk, B., De Haan, J., & Diewert, E. (2011). Handbook on residential property prices (RPPIs). doi:10.2785/34007.
Bourassa, S. C., Hoesli, M., & Sun, J. (2006). A simple alternative house price index method. Journal of Housing Economics, 15(1). doi: 10.1016/j.jhe. 2006.03.001.
Cannaday, R. E., Munneke, H. J., & Yang, T. T. (2005). A multivariate repeat-sales model for estimating house price indices. Journal of Urban Economics, 57(2). doi:10.1016/j.jue.2004.12.001.
Case, B., Pollakowski, H. O., & Wachter, S. M. (1991). On choosing among house price index methodologies. Real Estate Economics, 19(3). doi: 10.1111/1540-6229.00554.
Case, K., & Shiller, R. (1987). Prices of single-family homes since 1970: new indexes for four cities. New England Economic Review, September/October.
Clapp, J. M., & Giacotto, C. (1992). Estimating price indices for residential property: a comparison of repeat sales and assessed value methods. Journal of the American Statistical Association, 87.
De Vries, P., de Haan, J., van der Wal, E., & Mariën, G. (2009). A house price index based on the SPAR method. Journal of Housing Economics, 18(3). doi: 10.1016/j.jhe.2009.07.002.
Dorsey, R. E., Hu, H., Mayer, W. J., & Wang, H. Chen. (2010). Hedonic versus repeat-sales housing price indexes for measuring the recent boom-bust cycle. Journal of Housing Economics, 19(2). doi: 10.1016/j.jhe.2010.04.001.
Eichholtz, P. M. A. (1997). A long run house price index: the Herengracht index, 1628–1973. Real Estate Economics, 25(2). doi: 10.1111/1540-6229.00711.
Englund, P., Quigley, J. M., & Redfearn, C. L. (1998). Improved price indexes for real estate: measuring the course of Swedish housing prices. Journal of Urban Economics, 44(2). doi: 10.1006/juec.1997.2062.
Foryś, I. (2012). Metoda mix-adjustment wyznaczania indeksów cen nieruchomości mieszkaniowych na przykładzie lokali spółdzielczych. Studia I Materiały Towarzystwa Naukowego Nieruchomości, 20(1).
Francke, M. K. (2010). Repeat sales index for thin markets. Journal of Real Estate Finance and Economics, 41(1). doi: 10.1007/s11146-009-9203-1.
Gouriéroux, C., & Laferrère, A. (2009). Managing hedonic housing price indexes: the French experience. Journal of Housing Economics, 18(3). doi: 10.1016/j.jhe.2009.07.012.
Guo, X., Zheng, S., Geltner, D., & Liu, H. (2014). A new approach for constructing home price indices: the pseudo repeat sales model and its application in China. Journal of Housing Economics, 25. doi: 10.1016/j.jhe.2014.01.005.
Jones, C. (2010). House price measurement: the hybrid hedonic repeat-sales method. Economic Record, 86(272). doi: 10.1111/j.1475-4932.2009.00596.x.
Kempa, K., & Witkowska, D. (2011). Returns from the art market. Price index evaluated for the most-traded Polish painters. Quantitative Methods in Economics, 15(2). doi: 10.4135/9781849209397.
Kokot, S. (2014). The analysis of differences in residential property price indices. Real Estate Management and Valuation, 22(3).
Kokot, S. (2015). Diversified price dynamics in some sub-segments of the housing market. Folia Oeconomica Stetinensia, 84. doi:10.1515/foli-2015-0030.
McMillen, D. P., & Thorsnes, P. (2006). Housing renovations and the quantile repeat-sales price index. Real Estate Economics, 34(4). doi: 10.1111/j.1540-6229.2006.00179.x.
Nagaraja, C., Brown, L., & Wachter, S. (2014). Repeat sales house price index methodology. Journal of Real Estate Literature, 22(1). doi: 10.5555/reli.22.1. f22430v375351169.
Nicholas, T., & Scherbina, A. (2013). Real estate prices during the roaring twenties and the great depression. Real Estate Economics, 41(2). doi: 10.1111/j.1540-6229.2012.00346.x.
Pollakowski, H. O. (1995). Data sources for measuring house price changes. Journal of Housing Research, 6(3).
Prud’homme, M., & Diewert, E. (2011). Repeat sales methods. In Handbook on residential property price indices.
Raff, D., Wachter, S., & Yan, S. (2013). Real estate prices in Beijing, 1644 to 1840. Explorations in Economic History, 50(3). doi: 10.1016/j.eeh.2012.10. 003.
Shiller, R. J. (2014). Speculative asset prices. American Economic Review, 104(6).
Shiller, R. J. (2015). Irrational exuberance. Princeton University Press.
Trojanek, R. (2012). An analysis of changes in dwelling prices in the biggest cities of Poland in 2008-2012 conducted with the application of the hedonic method. Actual Problems of Economics, 7(2).
Trojanek, R., Tanas, J., Raslanas, S., & Banaitis, A. (2017). The impact of aircraft noise on housing prices in Poznan. Sustainability, 9(11). doi: 10.3390/su9112088.
Trojanek, M., & Trojanek, R. (2012). Profitability of investing in residential units: the case of real estate market in Poland in the period. Actual Problems of Economics, 2(7).
Widlak, M., & Tomczyk, E. (2010). Measuring price dynamics: evidence from the Warsaw housing market. Journal of European Real Estate Research, 3(3). doi: 10.1108/17539261011094722.
Widłak, M., Waszczuk, J., & Olszewski, K. (2015). Spatial and hedonic analysis of house price dynamics in Warsaw. NBP Working Paper.
Yeon, K. (2016). A study on repeat sales house price index based on penalized quantile regression. Procedia Computer Science, 91. doi: 10.1016/j.procs. 2016.07.071.
Zhang, L., & Yi, Y. (2017). Quantile house price indices in Beijing. Regional Science and Urban Economics, 63. doi: 10.1016/j.regsciurbeco.2017.01.002.
Most read articles by the same author(s)
- Agnieszka Małkowska, Michał Głuszak, Pro-investment local policies in the area of real estate economics – similarities and differences in the strategies used by communes , Oeconomia Copernicana: Vol 7 No 2 (2016)