Constructing House Price Indices in an Emerging Market: The Case of Kuwait

Abstract

The estimation of reliable house price indices can be problematic in the context of small and emerging markets, often due to data availability issues. This paper considers a number of alternative approaches to constructing house price indices in the context of Kuwait. Kuwait is an interesting case in that while it has considerable wealth due to its oil reserves, it still shares many of the characteristics of an emerging economy, and in turn faces many of the same challenges with respect to housing data. The lack of individual property level data means that hedonic or repeat sales index construction methods are not viable, the paper therefore has to rely upon weighting and stratification methods. The alternative index estimations are compared by considering their accuracy in out-of-sample forecasts. The results highlight that despite the data limitations in place, largely consistent and accurate measures can still be produced.