In the wake of the financial crisis, commercial property price indexes (CPPIs) were identified as an important gap in the data available for monetary policy and financial stabilization. Although national statistics offices (NSOs) have begun to develop CPPIs, there are many challenges. Commercial properties are quite heterogeneous, and transactions are often irregular, particularly in recession-hit markets, so constructing an index that simply tracks the average transaction price of a sample of fixed-quality properties is generally not feasible. Furthermore, the frequency of repeat sales may be too low to implement repeat-sales methods, which are based on successive transactions in the same property. Indexes compiled in the private sector have typically been based on appraisals, but appraisals may suffer from subjectivity, as well as smoothing and lagging behind market price developments. In addition, one of the things CPPIs are needed for is national accounts measurement, and for this purpose, the indicators of price change must be disaggregated into land and structures. Experts on price measurement representing academia and NSOs who are working on developing new approaches to the compilation of CPPIs will present and discuss research on overcoming these challenges in compiling CPPIs. They share a common goal – to develop a framework for measurement of CPPIs as official statistics.

Methods that are feasible for national statistics offices to implement for constructing commercial property price indexes (CPPIs) must overcome many challenges. Tracking the evolution of the average transaction price for a fixed-quality bundle of properties is generally not feasible. Furthermore, the frequency of repeat sales may be too low to implement repeat-sales methods, which are based on successive transactions in the same property. Typically, indices compiled in the private sector have been based on appraisals, but appraisals may suffer from subjectivity, as well as smoothing and lagging behind market price developments. Methods for constructing CPPIs from transactions data are therefore developed and demonstrated. Methods for decomposing the change in the CPPI into changes in the land prices and changes in structure prices are also tested. This decomposition is needed for national accounts purposes.

Organiser: Marshall Reinsdorf 

Chair: Marshall Reinsdorf 

Speaker: PROF. DR. Chihiro Shimizu 

Speaker: Jens Mehrhoff 

Speaker: Miriam Steurer 

Speaker: Dr Marc Francke 

Discussant:  Erwin Diewert