1. Improved price index for condominiums by Han-Suck Song a and Mats Wilhelmsson b a) Department of Real Estate Economics, Royal Institute of Technology (KTH), Stockholm, Sweden han-suck.song@abe.kth.se b) Centre for Banking and Finance (CEFIN), Royal Institute of Technology (KTH), Stockholm, Sweden mats.wilhelmsson@abe.kth.se

2. Who presents the correct price information? 2 DN: March 12, 2009 DN: March 17, 2009

3. Why better apartment price index? – Economic indicator. – ”Underlying asset” in derivatives and insurance contracts. – More… 3

4. Construction of real estate price indexes Example of Index construction methods: Average prices (arithmetic mean and median) Repeated-Sales (Case & Shiller) Hedonic price index (different alternatives) Date of sale: Contract date or deed date? 4 16 oktober 2015Confidential - Valueguard AB © 2009 All rights reserved

5. Date of Sale: contract date vs. deed date 5 Advertisement Open house Contract date Deed date Statistic Sweden S&P KTH/Valueguard, Mäklarstatistik On average 55 days

6. Number of transactions per month and median price per square meter (Figure 1) 6

7. Periods Six periods – Before19001800 and older – 1900-1940Before World War II – 1940-1960After post-war – 1960-1975”Million programe” – 1975-1990Construction subsidies – After 1990Abolishment of the subsidy system

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9. X and Y Coordinates Distance to the “middle” Direction – Quadrants 9 NENW SWSE

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11. Estimation procedure I Single hedonic price equtation Vs. Multiple hedonic price equation (Moving Windows Regression)

12. Specification Dependent variables: ln(price) Independent variables: – ln(area), ln(room), ln(fee) – First floor, top floor, floor level, no. of floors – Elevator, balcony – 6 periods – ln(distance), geographical direction – Administrative parish – … – Time dummies

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14. Average price vs. Hedonic Index (Figure 2) 14

15. Date of Sale: Contract date vs. Deed date 15 The difference in index as compared to figures above is due to different samples; not all observations with deed date have contract dates, and vice versa.

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17. MWR-first, MWR-Final, and aggregated hedonic price indexes (Figure 3) 17

18. Model selection 18

19. Estimation procedure II Spatial hedonic price index Vs. Multiple hedonic price equation (Moving Windows Regression) – There is a presence of spatial dependency in our hedonic models. – However this seems not to spill over to the price index.

20. Spatial hedonic models (Figure 5) 20

21. Updating the index 21

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23. Conclusion – Date of sale important (contract date vs. deed date). – Among the many alternatives to estimate an apartment price index, estimating a single hedonic price eqationn seems sufficient. *Important to test for parameter heterogenity and spatial dependency. – Further work to improve quality of apartment price index: *Most important is to improve input of quality of inputs and number of attributes.