1 / 24

Owner-occupied Housing in the New Zealand Consumers Price Index

Daniel Griffiths Statistics New Zealand. Owner-occupied Housing in the New Zealand Consumers Price Index. EMG Conference 13 – 15 December 2006. Introduction. What we will cover Background to house prices Recent initiatives Current house price measures

liv
Download Presentation

Owner-occupied Housing in the New Zealand Consumers Price Index

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Daniel Griffiths Statistics New Zealand Owner-occupied Housing in the New Zealand Consumers Price Index EMG Conference 13 – 15 December 2006

  2. Introduction What we will cover • Background to house prices • Recent initiatives • Current house price measures • Conceptual approaches to owner-occupied housing in a CPI • New Zealand treatment of owner-occupied housing • National Accounts framework for owner-occupied housing • A unifying framework – Real Disposable Income measures(?) EMG Conference 13 – 15 December 2006

  3. House Prices Why house prices? Owner-occupied housing: • Housing as a consumption good • Housing as an investment • Composite of consumption and investment EMG Conference 13 – 15 December 2006

  4. Recent work in New Zealand Reserve Bank of New Zealand workshop: “Housing, Savings, and the Household Balance Sheet” • Investigation into Saving v Savings • Household wealth and asset prices EMG Conference 13 – 15 December 2006

  5. The Saving Identity SD = IT + INT – CFK – ΔB – CT EMG Conference 13 – 15 December 2006

  6. Current House Price Measures What is currently available • Quotable Value New Zealand • Real Estate Institute of New Zealand • Statistics New Zealand – Consumers Price Index What do users want in a house price measure? EMG Conference 13 – 15 December 2006

  7. Quotable Value New Zealand What is currently produced: • Average sale price • Quarterly House Price Index • Although, some issues with the measures... EMG Conference 13 – 15 December 2006

  8. Real Estate Institute of New Zealand What is currently produced: • Median sale price for houses and sections • Median days to sell • Sales volumes • Regional breakdowns EMG Conference 13 – 15 December 2006

  9. Conceptual approaches to CPIs Three main conceptual approaches to the measurement of owner-occupied housing in a Consumers Price Index • Uses • Payments • Acquisitions EMG Conference 13 – 15 December 2006

  10. Uses Best suited as a measure of: Cost of Living • Measured via the 'user cost' or 'rental equivalence' methods EMG Conference 13 – 15 December 2006

  11. User Cost method Measure the flow of services from housing • Cost of shelter consumed by households • Reduces to nominal interest rates and depreciation • Also, appreciation (although, negative user cost?!) • However, often seen as a 'notional' measure EMG Conference 13 – 15 December 2006

  12. Rental Equivalence method Imputes the value of the flow of services via the market rental price for housing: • Owner-occupiers as unincorporated dwellings(cf National Accounts treatment) • Estimated rental of the owner-occupied dwelling • However, can be difficulties with govt intervention; • composition of rental + owner-occupied housing EMG Conference 13 – 15 December 2006

  13. Payments Best suited as a measure of: Changes in purchasing power • Appropriate for income adjustment • Measures actual monetary outlays on consumer goods and services • Owner-occupied housing is actual payments EMG Conference 13 – 15 December 2006

  14. Treatment of Mortgage Interest Can be estimated two ways: • Simple revaluation method • Debt profile method EMG Conference 13 – 15 December 2006

  15. Simple revaluation method Estimates: movement in house prices compounded with movements in interest rates EMG Conference 13 – 15 December 2006

  16. Debt Profile method Estimates: Opportunity cost of deferring purchase of dwelling an additional year Quality is seen as the ability of the loan to service the purchase of the same quality of housing as in the base period (rather, profile of mortgages as exists in the base period.) EMG Conference 13 – 15 December 2006

  17. Acquisitions Best suited as a measure of: Consumer Inflation • Acquisition of consumer goods and services in the base period • Used by the RBNZ in monetary policy setting • Owner-occupied housing – net additions to the housing stock, within sector 'nets out' EMG Conference 13 – 15 December 2006

  18. CPI produced by Statistics NZ Purchase of New Housing • Constant quality price index • the acquisitions approach • Sample and price indicator design EMG Conference 13 – 15 December 2006

  19. National Accounts Framework Treatment of owner-occupied dwellings • Owner-occupiers as unincorporated ent. Household Income and Outlay Account • Gross output from owner-occupying • Rental equivalence EMG Conference 13 – 15 December 2006

  20. Real Disposable Income measures Real disposable income measure: Some measure of income Some measure of expenditure Previously published by Statistics NZ EMG Conference 13 – 15 December 2006

  21. Previously published RDI • Real Disposable Income Index (RDI) • Real Wage Rate Index RWRI • Discontinued because: • population coverage • Definition of income • Use of LCI • Use of CPI • Misuse and misunderstanding EMG Conference 13 – 15 December 2006

  22. Discussion of RDI measures 1997 Revision Advisory Committee to the CPI (RAC) • Removal of mortgage interest in headline CPI 1998 Advisory Committee on Economic Statistics and 2004 RAC EMG Conference 13 – 15 December 2006

  23. Possible frameworks Household Income and Outlay Account with a choice of CPI (uses approach for consistency?) or Model of Consumer Utility EMG Conference 13 – 15 December 2006

  24. Where to from here? • Require greater coherence in user needs • Are existing house price index adequate? • What are the other emerging needs? • Real disposable income measure? • House prices and income measures • Your comments... EMG Conference 13 – 15 December 2006

More Related