ABSTRACT
House prices are the most important aspect in the housing market from the perspectives of all economic agents in the market. This chapter discusses issues related to house price index and methodological frameworks for creating house price index. A consistent estimate of house prices at the national and sub-national level can have significant benefits. It provides a benchmark and adds to transparency. Transparency improves with increasing investment activities. Long-term sustainability of businesses and economies requires transparency and a low level of information asymmetry. Several house price indices are derived using a hedonic framework. The method uses detailed property characteristics to create a benchmark transaction and the benchmark is used to calculate price differences for all other transactions in the sample. The Roback model combines housing and labour markets. A combination of wages and land rent gives levels of profit for firms and utility for households.
