Abstract
This paper investigates tax inequities in assessed values and how these inequities in tax assessments affect house price indices using assessed values statistics. Using the unique rating valuation data from the top 10 cities of New Zealand during the period 1994–2009, it finds that house price measurements using the Sale Price Appraisal Ratio (SPAR) method have performed well compared to the repeated sales method suggested by Case and Shiller (1989) and the assessed values (AV) method proposed by Clapp and Giaccotto (1992). The presence of systematic estimated errors (both vertical and horizontal inequities) in assessed values posts a concern for house price measurements using assessed values statistics. In this situation, both the SPAR and AVmethods benefit from the law of compensation of errors by using all transaction data. A policy implication is that the SPAR model is a good choice when using assessed values to measure house price movements at frequent time intervals, in particular for small countries.
Highlights
Developing timely and reliable house price indices is of interest worldwide
Both panel A and panel B indicate that the estimated vertical inequity coefficients of α1 are generally between 0.9 and 1.1, and the nature of the vertical inequity found for this New Zealand data set is in line with other findings
This paper investigates house price measures for a small open economy using assessed value (AV) statistics
Summary
Several techniques for constructing a constant quality price index are available in the literature These include mainly hedonic, repeat sales and hybrid methods. The effectiveness of these methods depends on the quality and appropriateness of the data employed (Pollakowski 1995) This is true for countries where periodical property sales are small. When combined with transaction data, assessed value (AV) statistics can be used for estimating market price movements. There are some negative attributes when using assessed value statistics to estimate market price movements. Both random and systematic errors in assessment will influence the accuracy of house price measurements using assessed value statistics. Systematic errors are discouraged and audited by various statistical tests at the time of
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