The Residential Property Price Index has been revised back to January 2010. At an aggregate level the revisions are very minor. Figure 1 shows the national RPPI both before and after the revisions. The greatest difference occurs in December 2013, where the national index is revised downwards by 2.3%. In June 2017, the provisional national index is 1.7% higher than the unrevised estimate.
Revisions to some of the elementary price indices are greater. The regional house price indices are based on smaller volumes of transactions and this renders these indices more volatile and therefore more prone to revision.
The RPPI has been revised to include additional transaction data. As the statistical robustness of the RPPI price models improves with additional data, the revisions represent a significant qualitative improvement in the RPPI. No changes have been made to the underlying RPPI price models.
Three categories of additional transaction data have been incorporated into the revised RPPI. In order of importance, these are as follows
These data comprise the sales of sites with associated building agreements. Typically in these cases the buyer chooses a site and chooses a specific building option from plans. Separate prices are paid for the site and the construction. A contract is signed and the developer then constructs the dwelling.
These specific new dwelling sales have been excluded from the RPPI up to now, as their dual pricing structure and bespoke-like nature are characteristic of self-builds. Self-builds are explicitly outside the scope of official house price indices (as defined by Commission Regulation (EU) 93/2013). However, Eurostat has now clarified that as both the land and the construction are purchased from the same developer, and as these are open market purchases available to all prospective buyers, these specific types of contract are in fact within scope of the RPPI.
A second category of additional transaction data comprises unitary contracts for new dwellings. In practical terms a unitary contract is the same as the purchase of a site with an associated building agreement. The only difference is that a single bundled price is paid for both the land and the construction. These were originally excluded because of their bespoke-like nature. Following the clarification from Eurostat, these specialist types of new dwelling purchases have now also been incorporated into the RPPI.
A relatively small number of residual transactions have also been included in the RPPI. These are transactions filed too late to be included in the RPPI compilation. The general revision affords an opportunity to include these transactions also. These residual transactions comprise both new and existing dwelling sales.
The key effect on the RPPI from the inclusion of these additional categories of new dwelling sales (and to a lesser effect of the residual transactions) is that more transactional data is available to compile the RPPI. This qualitatively improves the RPPI and delivers a more robust index.
In contrast to the index itself, the inclusion of the additional transaction data necessarily affects volume, value, average price and median price statistics. The principal changes naturally occur in the new dwelling sales statistics. However, these also have a consequential effect on the all dwelling sales statistics.
Table 1 below presents the effects of the additional transaction data on the volume, value, average price and median price statistics for purchases by households on the open market (based on transactions filed with Revenue for the 12 months to June 2017). When the additional transactions are included, the volume of new dwelling sales more than doubles - increasing 121.6% from 2,816 to 6,239. The value of new dwelling sales increases 137.0% to €2,041.5 million. Both the average and median prices of new dwelling statistics also increase considerably, by 7.3% to €328,199 and 6.7% to €295,363 respectively.
|Table 1.1 Effect of revisions on additional Indicators (12 months to June 2017)|
|Category||Excluding additional transactions||Including additional transactions||Difference|
The effect of the additional transactions on the all dwelling sales statistics is less dramatic than the new dwelling sales statistics. Nevertheless, the effect is still significant. In the 12 months to June 2017, the volume of all dwelling sales increases 9.6% to 41,398 when the additional transactions are added. The value of all dwelling sales increases 12.8% to €10.7 billion in the same period. The average sale price increases 2.9% to €258,544 whereas the median sale price increases 5.0% to €210,000.