1.
Mind the data gap: ongoing development of the BIS commercial property price statistics
Robert Szemere
Monetary and Economic Department, BIS
International Conference on Real Estate Statistics Luxembourg, February 2019
The views expressed are those of the author and do not necessarily reflect those of the BIS

2. Outline
CPPI as input for policy makers & economic/financial stability analysis
Collecting both CPPIs and RPPIs?
G20 Data Gaps Initiative
CPPIs at the BIS: 4.1 BIS activities with CPPIs 4.2 Inventory 4.3 Publication
Looking ahead 5.1 Targeted indicators 5.2 Sources 5.3 Cooperation between compilers, national central bank and the BIS

3. 1. Widespread interest for policy makers…
Central banks
Demand and inflation
Monetary policy transmission mechanisms (eg banking intermediation)
Micro supervisors
Banks
Other Financial Institutions (regulated or not: shadow banks)
Macro prudential authorities – systemic risk
Across the financial system
Over time (pro cyclicality)

4. 1. CPPI information and financial stability assessments
Financing cycle: self-reinforcing forces between
Asset prices
Financial conditions eg risk premium / appetite
Credit demand & supply
Perceived loan quality
Impact on financial system’s soundness: commercial property as a guarantee and an asset (when invested directly)
Turn of the cycle
Underlying vulnerabilities as financial conditions tighten
Level of indebtedness matters (non-linearity)

5. 1. Example: increase in CPPI and build up of financial fragilities
increase of commercial property prices
higher asset/ collateral values
Build up of financial fragilities
Pro-cyclicality during expansion
commercial property developers’ balance sheets look stronger
increased corporate borrowing & bank lending

6. 1. Example: decline in CPPI and stress in the financial system
fall of commercial property prices
lower value of assets/collaterals
Pro-cyclicality during recession
stricter borrowing conditions thus less new credit
balance sheets of corporates deteriorates
Higher risks of commercial property developers’ bankruptcy and banks’ losses

7. 2. Collecting both residential and commercial property prices?
Significant efforts required for compiling CPPIs in addition to RPPIs…
… noting still important challenges faced in collecting RPPIs
Worth only if the information content is
Specific (ie different from RPPIs)
Reliable (ie not too uncertain)
Useful (for policy)

8. 2. Specific? Information content may not differ too much
Both prices are basically reflecting the same 2 cost components
Land (location)
Structure (construction costs)
Common forces driving residential and commercial prices
State of the economy
Financing conditions
Building costs
Structural factors (building permission, land availability, etc)

9. 2. Despite limitations, CPPIs can provide specific, useful information…
Different economic purposes
Commercial property: underlying activity is to generate income streams (eg rented properties, properties used in the production process such as retail premises, factories, offices)
Business investment nature
Residential property: household primary need for shelter
Less rapid obsolescence
Role of owner occupation rate

10. 2. … with distinct, important features
Greater correlation with business cycles
Business investment highly cyclical (compared to household demand)
Shorter financing conditions (maturity, leveraged finance)
More amplitude (volatility)
Rates of depreciation in bad times / rapid obsolescence of non-occupied assets
Bankruptcy procedures (firms versus households)
Fluctuations of banks’ exposures (provisions / losses)

11. 2. As always, let the data speak! The US example
CPPI more volatile than RPPI

12. 3. G20 Data Gaps Initiative: Phase 2
But G20 DGI is only the starting point
Aim: to cover as many countries as possible, similarly to Residential Property Price Indicators, where the BIS publishes data for 60 countries & publishing consistent data across countries.

13. 4.1 BIS activities with CPPIs
To monitor national developments by supporting the compilation and publication of CPPIs by national authorities.
To collect data and metadata from all sources but always through the national central bank
To publish data based on a common metadata template
To promote research by using CPPIs: For example BIS Annual Report, Quarterly Bulletins and Working Papers
Upcoming publication: (March 2019)
Irving Fisher Committee Report: Mind the data gap: commercial property prices for policy
Largely based on the Workshop on Commercial Property Price Indices organised by the Central Bank of Turkey.

14. 4.2 Data availability varies across countries
5 various dimensions
Geographical area: whole country, capital, major cities
Property: Industrial, retail, office, logistics
Compiler: statistical office, central bank, ministry, private source
Source of data: transactions, appraisals, financial market
Frequency: annual, half-yearly, quarterly, monthly
Consequently CPPIs are not easily comparable across jurisdictions

15. 4.2 Country coverage: 16 jurisdictions, with only 8 G20s*
G20s highlighted

16. 4.3 Publication on the BIS website

17. 5.1 Looking ahead: targeted indicators
1. Aggregate CPPI for the whole country: Why: to capture the entire market, useful for macro-economic analysis
2. Aggregate CPPI for capital city/financial centre or major cities: Why: to “catch” credit booms, useful for financial stability analysis
3 & 4 CPPI excluding rented flats* for the whole country and for capital city/financial centre or major cities:
Why: excluding the overlap between residential and commercial segments
*CPPI excluding rented flats will be compiled on a best effort basis as:
Flats rented out by households may not be registered
Rented flats, shops and offices may co-exist in the same building

18. 5.2 Sources Transactions Appraisals of lenders (eg banks)
Appraisals of property price information vendors
Financial market indicators (eg REITs)
Examples of CPPIs based on multiple sources
ECB: appraisals, transactions
Japan, the Ministry of Land, Infrastructure, Transport and Tourism (MLIT): transactions, REITs
Advantage: best possible coverage from complementary information

19. 5.3 How to support BIS efforts to collect and publish CPPIs?
As a researcher or as a private source:
By cooperating with national authorities to compile and publish CPPIs
By informing the national central bank on ongoing projects
As a central bank:
To inform BIS on any developments: new publications, improved methodology, breakdown
To transmit data to the BIS

20. Thank you. BIS CPPI statistics: https://www. bis