HOFINET | Housing Finance Information Network

The Estimation of Owner Occupied Housing Indexes using the RPPI: The Case of Tokyo

Download Document

Abstract

Dramatic increases and decreases in housing prices have had an enormous impact on the economies of various countries. If this kind of fluctuation in housing prices is in fiscal and monetary policies. However, during the 1980s housing bubble in Japan and the later U.S housing bubble, fluctuations in asset prices were not sufficiently reflected in price statistics and the like. The estimation of imputed rent for owner-occupied housing is said to be one of the most important factors for this. Using multiple previously proposed methods, this study estimated the imputed rent for owner-occupied housing in Tokyo and clarified the extend to which the estimated imputed rent diverged depending on the estimation method. Examining the results obtained showed that, during the bubble's peak, there was an 11-fold discrepancy between the Equivalent Rent Approach currently employed in Japan and Equivalent Rent calculated with a hedonic approach using market rent. Meanwhile, with the User Cost Approach, during the bubble period when asset prices rose significantly, the values became negative with some estimation methods. Accordingly, we estimated Diewart's OOH Index, which was propsed by Diewert and Nakamura (2009). When the Diewert's OOH Index results estimated here were compared to Equivalent Rent Approach estimation results modified with the hedonic approach using market rent, it revealed that from 1990 to 2009, the Diewert's OOH Index results were on average 1.7 times greater than the Equivalent Rent Approach results, with a maximum 3-fold difference. These findings suggest that even when the Equivalent Rent Approach is improved, significant discrepancies remain.

< Back to Search Results