1. Seeking a Benchmark for RPPIs
Presentation to the Workshop on
“Residential Property Price Indices” organised by Statistics Netherlands
10-11 February 2011
Chihiro Sakuraba
Bank of Japan
The views expressed are those of the speaker and should not be attributed to the Bank of Japan.

2. RPPI as an unbiased-sampling
Population (or Universe) of RPPI a) individual property: completely heterogeneous, gigantic but fixed number b) random and low frequency of sales
Selection procedures c) non-random sampling, or constant monitoring d) non-periodic observation e) control or neglect of incidental factors
Chihiro Sakuraba "Workshop on RPPIs" February 2011

3. Residential properties as risky assets
one of the household investment
high dependency on external financing
subject to rational portfolio selection
Intrinsically, a benchmark index required.
Chihiro Sakuraba "Workshop on RPPIs" February 2011

4. Value and price of residential property
Σpt qt Σpt q0
value index≡ = ≡price index, if qt =q0
Σp0 q0 Σp0 q0
Since the (quality-adjusted) quantity of residential properties is unchanged or known, the aggregate value of properties becomes a RPPI.
If the average external financing ratio has been stable, then the credit aggregates for housing coincides the true RPPI.
Chihiro Sakuraba "Workshop on RPPIs" February 2011

5. Chihiro Sakuraba "Workshop on RPPIs" 10-11 February 2011

6. Credit aggregates: benchmark features
span the universe
not involve quality and aggregation issues
include marginal movements even in short run
may not be robust to structural change either in capital markets or property supply
Chihiro Sakuraba "Workshop on RPPIs" February 2011

7. Chihiro Sakuraba "Workshop on RPPIs" 10-11 February 2011
Issues
Aggregation of housing loans and home mortgages
Investment behavior constrained by imperfect property market, e.g. asymmetric information of owned home
Collateral policy of lenders
Casualty issues, e.g. coincidence with macroeconomic activities or credit cycles, deeply related to macroprudential policy.
Chihiro Sakuraba "Workshop on RPPIs" February 2011

8. Why we need a benchmark for RPPIs?
A benchmark RPPI
assures optimal decision in property investment and housing credit,
enhances the competitiveness of property market, and
provides precise information to authorities.
Testing coincidence with credit aggregates will be a plausible way of selecting a benchmark RPPI.
Thank you for your attention.
Chihiro Sakuraba "Workshop on RPPIs" February 2011