Distributism and Affordability Some Property Indices Sources. Notebook Post #Moduloft

Residential property price indices for Tokyo

Residential Property Price Indexes for TokyoErwin Diewert and Chihiro Shimizu1 Revised April 28, 2014Discussion Paper 13-07, School of Economics,The University of British Columbia,Vancouver, Canada, V6T 1Z1.
The paper uses hedonic regression techniques in order to decompose the price of a house into land and structure components using real estate sales data for Tokyo. In order to get sensible results, a nonlinear regression model using data that covered multiple time periods was used. Collinearity between the amount of land and structure in each residential property leads to inaccurate estimates for the land and structure value of a property. This collinearity problem was solved by using exogenous information on the rate of growth of construction costs in Tokyo in order to get useful constant quality subindexes for the price of land and structures separately. The paper also shows how flexible depreciation schedules for houses can be obtained using sales data.Key WordsHouse price indexes, land and structure components, time dummy hedonic regressions, spline functions, flexible functional forms, Fisher ideal indexes, flexible depreciation rates.

Walter Erwin Diewert
37.83University of British Columbia – Vancouver
Chihiro Shimizu
20.94The University of Tokyo

How to Better Measure Hedonic Residential Property Price Indexes

Author(s):Mick SilverPublished Date:November 2016
I. Introduction
A. The problems
Macroeconomists and central banks need measures of residential property price inflation. They need to identify bubbles, the factors that drive them, instruments that contain them, and analyze their relation to recessions.2 Such measures are also needed for the System of National Accounts and may be needed as part of the measurement of owner-occupied housing in a consumer price index—see Eurostat et al. (2013, chapter 3). Timely, comparable, proper measurement is a prerequisite for all of this, driven by concomitant data.

About property price statistics
These statistics track developments in residential property prices (RPP) and commercial property prices (CPP) across the world via three data sets – detailed residential, selected residential and commercial. The selected residential property prices are harmonised as much as possible with recommendations in the Handbook on residential property prices, an internationally agreed framework for classifying property price issues.





E. F. Schumacher
From Wikipedia, the free encyclopedia

E. F. Schumacher

Photograph of Schumacher from the cover of Small Is Beautiful, 1973
Born Ernst Friedrich Schumacher
16 August 1911
Bonn, German Empire
Died 4 September 1977 (aged 66)
Education University of Oxford
Columbia University
Occupation Economist
Ernst Friedrich Schumacher (16 August 1911 – 4 September 1977) was a German-British statistician and economist who is best known for his proposals for human-scale, decentralised and appropriate technologies.[1] He served as Chief Economic Advisor to the British National Coal Board from 1950 to 1970, and founded the Intermediate Technology Development Group (now known as Practical Action) in 1966.

In 1995, his 1973 book Small Is Beautiful: A Study of Economics As If People Mattered was ranked by The Times Literary Supplement as one of the 100 most influential books published since World War II.[2] In 1977 he published A Guide for the Perplexed as a critique of materialistic scientism and as an exploration of the nature and organisation of knowledge.

Spreadsheet with Data and Graphs.






Interest ratesEconomic growthMonetary policyMonetary transmissionPrices vs. quantitiesQuantity constraintsResource constraintsQuantity theory of credit

Our empirical findings reject the canonical view that interest rates somehow affect economic growth, and in an inverse manner. To the contrary, long-term and short-term interest rates follow the trend of nominal GDP, in the same direction, in all countries examined. This suggests that markets are not in equilibrium and the third factor driving GDP growth is a quantity – as shown by Werner, 1997, Werner, 2012a in the case of Japan (namely, the quantity of bank credit creation for the real economy – i.e., for GDP transactions, as the Quantity Theory of Credit postulates; Werner, 2013a).

Herman Daly wrote in 1991:
“Environmental economics, as it is taught in universities and practiced in government agencies and development banks, is overwhelmingly microeconomics. The theoretical focus is on prices, and the big issue is how to internalize external environmental costs so as to arrive at prices that reflect full social marginal opportunity costs. Once prices are right, the environmental problem is ‘solved’”

(Daly, 1991, 255).





















Why is the housing market important to the economy?
The housing market is closely linked to consumer spending. When house prices go up, homeowners become better off and feel more confident. Some people will borrow more against the value of their home, either to spend on goods and services, renovate their house, supplement their pension, or pay off other debt.

When house prices go down, homeowners risk that their house will be worth less than their outstanding mortgage. People are therefore more likely to cut down on spending and hold off from making personal investments.

Mortgages are the greatest source of debt for households in the UK. If many people take out large loans compared to their income or the value of their house, this can put the banking system at risk in an economic downturn.

Housing investment is a small but unpredictable part of how we measure the total output of the economy. If you buy a newly built home, it directly contributes to total output (GDP), for example through investment in land and building materials as well as creating jobs. The local area also profits when new houses are built as newcomers will start using local shops and services.

Buying and selling existing homes does not affect GDP in the same way. The accompanying costs of a house transaction still benefit the economy, however. These can include anything from estate agent, legal or surveyor fees to buying a new sofa or paint.


I wrote this following bit in 2011.

Some people say a crash in house prices is necessary as a Valuer that has valued Oil refineries and Gas Terminals in another life I have one comment on that.
There is a way of calculating the base market price on a real asset such as property the logical lower end price or entry price for property is not zero just as the maximum price must be related in some way to income multiples. ( my final year thesis for my degree was the Contractors Principle of Valuation for Taxation of Gas Terminals in Scotland, I had been employed by one of the Seven sisters. )
My very simple contention is that the basic price of a property in a market where there is no longer any activity.In a crashed or stagnant market supply and demand does not provide a Market price of comparable transactions in this situation the economic replacement cost of the property needs to be refrenced. This is a fairly easy thing to calculate there is a thing called Spons an almanac of prices/costs for the contracting world) that gives average building materials and labour costs for building. Today I would say £150 persqft would be a sensible price per square foot for a fairly traditional british house build there are cheaper ways and better ways to build but this is a first principles 101.
The price of any property has a land element generally this is around 1/3rd of the total price any amount of sophisticated analysis will get you a variation around this figure and so on but the humble 1/3rd 1/3rd 1/3rd usually brings home the bacon so I’ll use it here so that then is £150 psft for the land element.

Finally there is the last 1/3rd which is for the unknowns opportunity cost and profit. If we want to take the profit out again the maths to do that is easy but I’ll leave it as a 1/3rd for now.

Right that gives a base cost pers sqft of £450 per sqft.

For a more basic budget build one could argue for £100 per sq ft giving £300 pers sqft .

Anyway if we say take £275 psf which is very low and in all probability below the actual economic replacement cost if you take a 750 sqft 2 bedroom apartment that would be a bottom line economic replacement cost value of £206,250. Regardless of anything people need somewhere to live in the future and an economic value has to be placed on production my question is this what policies going forward an banking system will support the proposition that every family should at least have a 2 bedroom family home and the cost of providing it would be roughly the figure I am suggesting if one factors in the opportunity cost for instance the government has lots of land it could contribute for free but its value still has to be recognised even if not charged for. These are open Market prices and assumptions but provision of housing has to be priced some way and I do plan to get into some analysis of the Affordable so called social housing side fo the equation as I say this is a first principles starting 101.

I am going to develop this hypothesis further but just wanted to get it on paper going forward from this blog, in a melt down of the banking system and complete crash of the UK property market these first principles of economic replacement cost will be necessary to avoid a huge potential scam.

And Here we are now in December 2020 9 and a half years later.

I have indeed been developing this Hypothesis further.
Moduloft Finance Affordable Finance A Framework of Understanding (First Draft Still Proof Reading)

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