Controlling for transactions bias in regional house price indices

Mason, P. and Pryce, G. (2011) Controlling for transactions bias in regional house price indices. Housing Studies, 26(5), pp. 639-660. (doi: 10.1080/02673037.2011.581908)

Abstract

Transactions bias arises when properties that trade are not a random sample of the total housing stock. Price indices are susceptible because they are typically based on transactions data. Existing approaches to this problem rely on Heckman-type correction methods, where a probit regression is used to capture the differences between properties that sell and those that do not sell in a given period. However, this approach can only be applied where there is reliable data on the whole housing stock. In many countries—the UK included—no such data exist and there is little prospect of correcting for transactions bias in any of the regularly updated mainstream house price indices. Thispaper suggests a possible alternative approach, using information at postcode sector level and Fractional Probit Regression to correct for transactions bias in hedonic price indices based on one and a half million house sales from 1996 to 2004, distributed across 1200 postcode sectors in the South East of England.

• Item Type: Articles
• Additional Information: This is an Author's Accepted Manuscript of an article published in Mason, P., and Pryce, G. (2011) Controlling for transactions bias in regional house price indices. Housing Studies, 26 (5). pp. 639-660. Copyright Taylor and Francis, available online at: http://www.tandfonline.com/10.1080/02673037.2011.581908
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Pryce, Professor Gwilym and Mason, Dr Phil
• Authors: Mason, P., and Pryce, G.
• College/School: College of Social Sciences > School of Social and Political Sciences > Urban Studies; College of Social Sciences > School of Education > People, Place & Social Change
• Journal Name: Housing Studies
• Publisher: Taylor & Francis
• ISSN: 0267-3037
• ISSN (Online): 1466-1810
• Published Online: 06 July 2011
• Copyright Holders: Copyright © 2011 Taylor and Francis
• First Published: First published in Housing Studies 26(5):639-660
• Publisher Policy: Reproduced in accordance with the copyright policy of the publisher

Project Code	Award No	Project Name	Principal Investigator	Funder's Name	Funder Ref	Lead Dept
40851	1	Which House Price? Finding the Right Measure of House Price Inflation for Housing Policy	Gwilym Pryce	Office of the Deputy Prime Minister (ODPM)	UNSPECIFIED	SPS - URBAN STUDIES