House price index

House price index – 2nd quarter of 2018

Housing
House price index – 2nd quarter of 2018
  • The observed annual inflation rate for house prices amounts to 3.8 % in the second quarter of 2018 compared to 2.5 % in the previous quarter.[1]
  • The average inflation rate for the last four quarters amounts to 3.4 %.
  • The house price index went up by 1.0 % in the second quarter of 2018 compared to the previous quarter.

Each quarter, statbel, the Belgian statistical office, calculates a house price index according to European regulations (see page 5 for detailed information on the methodology).

The annual inflation rate for house prices amounts to 3.8 % in the second quarter of 2018 compared to 2.5 % in the previous quarter.  The average inflation rate for the last four quarters amounts to 3.4 %. The house price index stands at 108.70 points (2015=100) against 107.67 points in the previous quarter: it has increased by 1.0 % compared to the first quarter of 2018.

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The European Union Member States calculate the house price index according to a harmonised methodology which makes it possible to compare the evolution of house prices across the different Member States. The house price index measures the price evolution of private real estate. The index follows price changes of new or existing residential real estate purchased by households, irrespective of their purpose (letting or owner-occupying). The house price index measures the price evolution with the assumption that the characteristics of the property sold remain unchanged. The index thus measures the actual price evolution without interference of qualitative changes. If the size of the property sold increases, the average price of houses sold will also increase, which does not necessarily mean that the house price index will have increased. Therefore, this index does not measure the evolution of the average sales price of real estate. More information on the applied method can be found on page 5 of this press release.

The house price index is based on real estate transaction data from the General Administration of the Patrimonial Documentation of the FPS Finances. The results for the latest quarters are considered provisional and may be reviewed during the following quarter when additional data become available.

The house price index can be broken down by new houses and existing houses. In the second quarter of 2018, annual inflation amounted to 5.1 % for new houses and 3.4 % for existing houses. The weights of these two items in the overall index amount to 20.1 % and 79.9 % respectively for the year 2018.

 

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Comparison between Belgium and the neighbouring countries

Since Eurostat will only publish the neighbouring countries' house price index for the second quarter of 2018 on 5th October 2018, the first quarter 2018 is the most recent quarter to use as a basis for comparison. In Belgium, inflation stood at 2.5 % in the first quarter of 2018 compared to 3.5 % in the previous quarter. The Netherlands experienced an inflation rate of 9.3 % in the first quarter 2018, an increase compared to the 8.5 % inflation rate in the previous quarter. France experienced an inflation rate of 3.4 % in the first quarter, a slight increase compared to the 3.3 % inflation rate registered in the fourth quarter of 2017. In Germany, inflation stood at 5.3 % in the first quarter of 2018, an increase compared to the rate of 4.6 % registered in the fourth quarter of 2017. Inflation for the euro area as a whole went from 4.3 % in the fourth quarter of 2017 to 4.5 % in the first quarter of 2018.

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[1] Figures for the last two quarters are considered provisional and may be reviewed in later publications.

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Table 1
Table 2
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House price indexes, weight, last 8 years

The table below shows the weights of the components of the house price index (purchases of new dwellings and purchases of existing dwellings). The weight for purchases of new dwellings is based on the gross fixed capital formation in housings. The weight for purchases of existing dwellings corresponds to the total value of residential property transactions by households on the secondary market for existing dwellings.

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Technical information

The house price index measures the price evolution of real estate prices on the market of private property. The index follows price changes of new or existing residential real estate purchased by households, irrespective of their purpose (letting or owner-occupying). Only market prices are taken into account. Houses built by their owners are therefore not included. The price of the building plot is included in the house price.

The house price index is based on real estate transaction data from the General Administration of the Patrimonial Documentation of the FPS Finances. The prices used are those included in the deeds of sale. Given the time between the date on which the preliminary sales agreement is signed and the date on which the deed is executed (between three and four months), this index measures the price evolution with a delay compared to the actual date on which the sales price is set. This delay is inherent to the data source.

The house price index is calculated by the European Union Member States, Norway and Iceland. Eurostat calculates the index for the euro area (as well as for the European Union as a whole) using the harmonised indices of the Member States. Given the role of the housing market in the current economic and financial crisis, the house price index is one of the indices used in the procedure to prevent and correct macroeconomic imbalances in the European Union.

The house price index is calculated in accordance with European Regulation 93/2013 of 1st February 2013 establishing owner-occupied housing price indices. Data are available from 2005 onward for Belgium as well as for the European Union and the majority of European countries.

The house price index can be broken down by new houses and existing houses. The weights of those two items in the overall index are determined by the gross fixed capital formation in houses (for the new houses) and the total value of transactions of the previous year (for the existing houses). Until 2013, the house price index of new houses was roughly estimated based on the output price index in the construction sector. Since 2014, it is also based on real estate transaction data.

Since the houses that are put up for sale differ from one quarter to another, the changes in characteristics are processed with hedonic regression models to eliminate price fluctuations due to changes in characteristics of the properties sold. These models aim to estimate the theoretical price on the basis of the characteristics and location of the houses sold. This theoretical price is then compared to the actual price. Two indices are calculated, one with the actually observed transaction prices and the other with the prices estimated by the regression model. The final index is obtained by calculating the ratio of the index obtained with the actual transaction prices compared to the index obtained with the estimated prices. Therefore, the house price index may be evolving differently from the observed average prices.

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3.8% annual inflation

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