CHAPTER 1 INTRODUCTION
OVERVIEW OF THE HOUSE PRICE INDEX
1.1 The HPI measures price change of the stock of established houses over time. While other price indexes produced by the ABS provide a weighted average of the price changes in a group of goods or services, the HPI specifically measures prices of established, detached houses in each of the capital cities in Australia. Separate indexes are produced for each capital city, and these indexes are combined to produce a weighted average index of the eight capital cities.
1.2 The HPI is compiled quarterly by the ABS for quarters ending 31 March, 30 June, 30 September and 31 December each year. The quarterly index numbers are published approximately five weeks after the end of each quarter in the publication: House Price Indexes: Eight Capital Cities (cat. no. 6416.0).
1.3 The index numbers published for the two most recent quarters are regarded as preliminary and are revised in subsequent publications as more data are collected.
1.4 The standard procedure for constructing price indexes is to select a sample of representative items and to re-price the identical items through time (a matched sample). This approach is not viable in the case of established houses as the observable prices in each period invariably relate to a different set of houses.
1.5 The approach taken by the ABS is that price observations are grouped into clusters ('stratified') based on similarities in the housing stock. Period to period changes in the median price for each cluster are weighted together according to the importance of the cluster at the capital city level.
1.6 The prices of individual houses, or groups of houses, do not all change at the same rate. Also, the set of houses being sold will change between periods. Therefore, the HPI for a particular period will reflect the weighting of the component clusters of the index and the measured price behaviour of each cluster.
STRUCTURE OF THIS PUBLICATION
1.7 Chapters 2 and 3 provide an overview of the purpose, uses and history of the HPI.
1.8 Chapter 4 provides some information on price index concepts, index formulas commonly used, and how these relate to the approach taken in the HPI.
1.9 Chapter 5 discusses various conceptual approaches to measuring changes in house prices.
1.10 Chapters 6 to 9 provide detailed information on the HPI, including its scope and coverage, the sources of data for weights and how they are calculated, the sources of house price data, how transactions are measured and at what point in time.
1.11 Chapter 10 provides information on how results of periodic reviews and changes to weights are incorporated into price indexes. This includes a description of index concepts such as index reference period and chain linking.
1.12 Chapter 11 brings together information from preceding chapters to describe how the index is calculated in practice. It includes a description of the stratification method used in the index, the two stage approach to produce the HPI and the consequent revision practices.
1.13 Chapter 12 describes how the HPI is released by the ABS and provides users with some guidance on interpretation of index numbers.
1.14 Chapter 13 lists the principal price indexes produced by the ABS. It also provides an overview of other data series and price indexes related to housing which are produced by the ABS and published with the HPI.
1.15 Appendix 1 provides the capital city level weighting pattern underlying the HPI and the project home price index. Appendix 2 provides some information related to the use of ABS price indexes for the purpose of contract price indexation. Appendix 3 provides a list of references.
OTHER HPI INFORMATION
1.16 The quarterly publication House Price Indexes: Eight Capital Cities (cat. no. 6416.0) includes explanatory notes which provide limited information on the concepts, sources and methods of all the published series. The December 2008 issue of the publication provides an appendix describing changes to the weights and stratification method implemented in that quarter.
1.17 Other publications:
This page last updated 11 December 2009