Towards a System of Local House Price Indices

Abstract

This paper argues that understanding of the performance and price structure of urban housing markets in the UK would be enhanced by limited investment in comprehensive systems for collecting data on housing transactions. These data would allow the construction of reliable and accurate indices at different levels of spatial aggregation. The empirical part of the paper uses data from the Western Australian Valuer General's Office to illustrate the data requirements and practical considerations in the construction of indices. The dataset provides comprehensive information on property attributes and the sales history of individual transactions and allows a comparison of the accuracy of a number of variants on the hedonic and repeat-sales index methods. The evidence suggests repeat-sales indices can be constructed on less detailed data with little loss of accuracy. The paper concludes by suggesting that repeat-sales methods, although largely ignored in the UK to date, lend themselves well to the development of a system of local price indices using the information recorded by the Land Registry.