Definition of house price index
A measure of the prices at which dwellings are bought and sold over time.
Indices can encompass different areas, for example a city, state, region or country.
Growth rates of house price indices measure house price inflation. Transactions fluctuate over the year, so that seasonal adjustment is important. In addition, housing is a varied commodity in terms of building quality and location, so the accuracy of house price indices depends on quality-adjustment. Few countries’ house price indices are estimated in the same way, which can create problems for comparisons of house price inflation between them.
Some indices cover only narrow market segments. For example, house price measures for many central and eastern European countries refer to only new dwellings in a selection of cities and their price behaviour differs from those for existing homes. Australia measures only prices for major cities and Japan has no house price data at all. Indices may use data from different sources - sales listings, mortgages, legal paperwork, or formal registration of title – that contain different pieces of information gathered at distinct points in time. When making cross-country comparisons, it is wise to check sources and to look at the general directions of change rather than to expect that detailed differences mean much.
Eurostat and member governments have been for some time trying to harmonise house price data for the whole of the European Union, but it is now only beginning to publish (incomplete) indices.