Residential property price indices using asking prices: the case of Cyprus
Journal
Cyprus Economic Policy Review
Date Issued
December 2020
Author(s)
Abstract
This paper uses micro data on property advertisements published in widely circulated
newspapers and online to construct residential price indices for Cyprus. The sample covers
the period from 2000Q1 to 2018Q2 and contains information on various property
characteristics (e.g. property type, size, location). A regression model is estimated using
rolling samples of 12, 20 and 40 quarters. We obtain six sub-aggregate price indices, i.e. for
houses and flats located in the districts of Nicosia, Limassol, and in the remaining districts.
Using the six sub-aggregate indices, we construct five aggregate price indices, i.e. for (i)
houses, (ii) flats, (iii) Nicosia district, (iv) Limassol district, and (v) other districts, as well as
an overall property price index for Cyprus. The estimated price indices are juxtaposed with
other available property price indices in Cyprus, namely the indices published by the
Central Bank, Eurostat, and the Royal Institution of Chartered Surveyors, as well as with a
number of macroeconomic indicators relating to the property market. The indices
constructed in this paper tend to be associated with slightly larger quarterly percentage
changes (higher growth and smaller contraction) compared to similar indices over common
periods. The resulting indices are significantly correlated with the corresponding property
price indices published by other organisations, and their agreement in the direction of
quarterly changes is high. The estimated indices are found to contain leading information
vis-à-vis other property price indices, particularly in the case of flats and the district of
Limassol. Also, the estimated indices are highly correlated with many key macroeconomic
variables, with the results suggesting that the former may lead developments in some
macroeconomic series. The properties of the proposed indices together with their timely
nature in terms of data availability could make them a useful tool for monitoring the
evolution of property prices as well as macroeconomic developments in Cyprus. The
estimation of sub-aggregate indices provides information on the key drivers (types, districts)
of fluctuations in the domestic property market. As the proposed indices are model-based,
the statistical significance of quarterly changes can be computed and confidence intervals
can be constructed around these changes to provide an informed depiction of property price
fluctuations
newspapers and online to construct residential price indices for Cyprus. The sample covers
the period from 2000Q1 to 2018Q2 and contains information on various property
characteristics (e.g. property type, size, location). A regression model is estimated using
rolling samples of 12, 20 and 40 quarters. We obtain six sub-aggregate price indices, i.e. for
houses and flats located in the districts of Nicosia, Limassol, and in the remaining districts.
Using the six sub-aggregate indices, we construct five aggregate price indices, i.e. for (i)
houses, (ii) flats, (iii) Nicosia district, (iv) Limassol district, and (v) other districts, as well as
an overall property price index for Cyprus. The estimated price indices are juxtaposed with
other available property price indices in Cyprus, namely the indices published by the
Central Bank, Eurostat, and the Royal Institution of Chartered Surveyors, as well as with a
number of macroeconomic indicators relating to the property market. The indices
constructed in this paper tend to be associated with slightly larger quarterly percentage
changes (higher growth and smaller contraction) compared to similar indices over common
periods. The resulting indices are significantly correlated with the corresponding property
price indices published by other organisations, and their agreement in the direction of
quarterly changes is high. The estimated indices are found to contain leading information
vis-à-vis other property price indices, particularly in the case of flats and the district of
Limassol. Also, the estimated indices are highly correlated with many key macroeconomic
variables, with the results suggesting that the former may lead developments in some
macroeconomic series. The properties of the proposed indices together with their timely
nature in terms of data availability could make them a useful tool for monitoring the
evolution of property prices as well as macroeconomic developments in Cyprus. The
estimation of sub-aggregate indices provides information on the key drivers (types, districts)
of fluctuations in the domestic property market. As the proposed indices are model-based,
the statistical significance of quarterly changes can be computed and confidence intervals
can be constructed around these changes to provide an informed depiction of property price
fluctuations
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