Turkish Hedonic House Price Index

by

Timur Hülagü

Vice Head of the Statistics Department

Central Bank of the Republic of Turkey

OUTLINE

2

House Price Index for Turkey (THPI) Data source Methodology

Measuring Quality Changes and Hedonic House Price Index (THHPI) Motivation Methodology Results

THPI – Data Source

3

THPI – Data Source

4

RAPOR

THPI – Data Source

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RAPOR

THPI – Data Source

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METHODOLOGY

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Stratified Median Price

Strata can be formed by taking into account location, area, age, type ofthe properties

Geographical location constituted the basis for stratification

Grouping by location is practical

Variation of prices by location is a key characteristic of housing markets

WEIGHTING

8

Weighting:

• Data on house sales in the previous year registered by the General Directorate of Land Registry and Cadastre are used as weights for aggregating the strata in constructing THPI

• Weights are updated each year

CITYSUB-CITYNUTS

LEVEL-2COUNTRY

Weight of Town in

City

Weight of City in Level-2

Weight of Level-2 in Country

EXTREME VALUES AND INDEXATION

9

We also perform Tukey’s Hinges

Q3+3*(Q3-Q1) > median unit price > Q1-3*(Q3-Q1)

Indexation:

• Chain Laspeyres Index

𝑰𝒕𝒚 = 𝛴𝑖𝜔𝑖𝑦𝑝𝑖𝑡𝑦

𝛴 𝜔𝑖𝑦𝑝𝑖12 𝑦−1

∗ 𝑰𝟏𝟐 𝒚−𝟏

THPI (2010=100)

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THPI

35-month, 32.7%

27-month, 39.0%

Why THHPI?

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2010

WHY THHPI?

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2014

THPI Data Composition– Housing Characterisitics

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Changes in quality directly affects house prices

39 variables in valuation reports

• Location

• Gross Area of Use

• Year of Construction

• Quality of Construction

• Number of Rooms

• Number of Bathrooms

• Number of Balconies

• Heating System

• Elevator

• Security

• Parking

• …

THHPI– Method

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«Characteristic Prices Approach»

log-linear regression

𝑙𝑛 𝑝𝑛𝑡 = 𝛽0

𝑡 +

𝑘

𝛽𝑘𝑡 𝑧𝑛𝑘𝑡 + 𝜀𝑛

𝑡 , ………………∀𝒊, 𝒕

𝒑𝒏𝒕 : n property’s apprisal value in period t

𝒛𝒏𝒌𝒕 : kth characteristic of apprised property

THHPI– Method

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Same basic methodology with THPI

Same stratum with THPI

Chained Laspeyres method

Tukey’s Hinges method (outlier detection)

THHPI– Method

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𝑃𝑖𝑡 =

𝑒𝑥𝑝( 𝛽0𝑡)𝑒𝑥𝑝[ 𝑘

𝛽𝑘𝑡 𝑧𝑛𝑘0 ]

𝑒𝑥𝑝( 𝛽00)𝑒𝑥𝑝[ 𝑘

𝛽𝑘0 𝑧𝑛𝑘0 ]

𝑷𝒊𝒕 : price index for period t

𝒛𝒏𝒌𝟎 : average kth characteristics for the base period (all n properties’)

Holding characteristics constant => Quality adjusted price index

THHPI– Method

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𝑃𝑖𝑡 =

𝑒𝑥𝑝( 𝛽0𝑡)𝑒𝑥𝑝[ 𝑘

𝛽𝑘𝑡 𝑧𝑛𝑘0 ]

𝑒𝑥𝑝( 𝛽00)𝑒𝑥𝑝[ 𝑘

𝛽𝑘0 𝑧𝑛𝑘0 ]

𝑷𝒊𝒕 : price index for period t

𝒛𝒏𝒌𝟎 : average kth characteristics for the base period (all n properties’)

Holding characteristics constant => Quality adjusted price index

January 2012, t=0

THHPI– Regression Example (K.Çekmece, January 2012)

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Characteristics Coefficients

Gross Area of Use (m2)0.005

(0.000)**

Quality of Construction0.109

(0.022)**

Year of Construction0.003

(0.001)*

No. of Bedrooms0.033

(0.017)*

No. of Bathrooms0.084

(0.029)**

No. of Balconies0.071

(0.017)**

Security Service0.333

(0.032)**

Heating Type0.118

(0.045)**

Elevator0.133

(0.028)**

Constant5.655

(2.040)**

THHPI – Significance by variables

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Cons. Quality

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Heating

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Elevator

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Bathroomsi

t

THHPI – 7 different models

Değişkenler (1) (2) (3) (4) (5) (6) (7)

Brüt Kullanım Alanı a a a a a a a

Yapım Yılı a a a a a a a

Yapı Kalitesi a a a a a a a

Oda Sayısı a a a a a a a

Banyo a r a a a a r

Isıtma Tipi a a r a a a r

Asansör a a a r a a r

Güvenlik a a a a r a r

Balkon a a a a a r r

Modeller

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Antalya

G.DoğuAltındağ,

Sincan

PursaklarBeşiktaş

B.evler

Bakırköy

Başakşehir,

Beylikdüzü

THHPI

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While THPI was 178.8, THHPI was 160.6 in March 2015. The 18.2 pp difference can be attributed toquality improvements in the housing market.

160.6178.8

143.1

020406080

100120140160180200

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TURKEY

THHPI THPI CPI

THHPI

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5.1

18.2

0

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18

20 Quality Change

THHPI– 3 Main Cities

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March 2015 THPI THHPI Quality Improvement

CPI

İstanbul 216.7 195.3 21.4 143.3

Ankara 157.0 153.1 3.9 143.8

İzmir 172.5 163.6 8.9 144.5

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THHPI

Istanbul AnkaraIzmir Turkey

Quality Improvement Levels in Turkey (February 2015, ~57 months)

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Highest Quality Improvement

TRA1 (Erzurum, Erzincan, Bayburt) 21,6

TR10 (İstanbul) 21,4

TR32 (Aydın, Denizli, Muğla) 19,5

TRC1 (Kilis, Adıyaman, Gaziantep) 19,2

Lowest Quality Improvement

TR82 (Çankırı, Kastamonu, Sinop) -0,1

TRC2 (Diyarbakır, Şanlıurfa) 2,7

TR51 (Ankara) 3,9

TR63 (Hatay, K.maraş, Osmaniye) 4,0

Quality Improvement/ Price Increase (February 2015, ~57 months)

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Highest Ratio %

TR81 (Zonguldak, Bartın, Karabük) 33,3

TRB1 (Bingöl, Elazığ, Malatya, Tunceli) 32,3

TR32 (Aydın, Denizli, Muğla) 28,6

TR21 (Edirne, Kırıkkale, Tekirdağ) 28,2

TRA1 (Erzurum, Erzincan, Bayburt) 26,8

Lowest Ratio %

TR82 (Çankırı, Kastamonu, Sinop) -1,0

TRC2 (Diyarbakır, Şanlıurfa) 4,0

TR51 (Ankara) 5,7

TR72 (Kayseri, Sivas, Yozgat) 7,0

TR63 (Hatay, Kahramanmaraş, Osmaniye) 7,0

Results

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Roughly, 1 out of 4 share of nominal house price increases in Turkey, inaggregate, and 1 out of 5 share on nominal house price increases in İstanbulare resulted from quality improvements.

In 57 months period, Real KFE 35,7 pp, or %25.0 Quality Imp. 18,2 pp, or %11.3 Pure Rise 17,5 pp, or %12.3

CENTRAL BANK OF THE REPUBLIC OF TURKEY

aytac.erdogan@tcmb.gov.tr

STATISTICS DEPARTMENT

THANK YOU

Discussion

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İSTANBUL ANKARA

Jan.12 Feb.15 Jan.12 Feb.15

Price (‘000 ₺) 137.3 209.0 103.8 142.9

Gross area of use (m2) 96.39 89.96 117.19 118.15

Year of construction 2001.88 2006.42 2002.47 2005.29

Quality of construction 0.58 0.54 0.44 0.49

No. of bedrooms 2.52 2.39 3.02 3.02

No. of bathrooms 1.24 1.22 1.23 1.28

No. of balconies 1.11 1.02 1.68 1.64

Security 0.15 0.16 0.04 0.05

Heating 0.91 0.87 0.91 0.86

Elevator 0.45 0.52 0.34 0.44

Average Characteristics

Discussion

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Share of New Apartments

Discussion

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TURKEY

201201=100

2012=100

Discussion

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Discussion

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