COMMERCIAL PROPERTY PRICE INDEXES
AND THE SYSTEM OF NATIONAL ACCOUNTS
W. Erwin Diewert
University of British Columbia and UNSW
Kevin J. Fox*
UNSW
Chihiro Shimizu National University of Singapore

Abstract.

This paper studies the problems associated with the construction of price indexes for commercial properties that could be used in the System of National Accounts (SNA). Property price indexes are required for the stocks of commercial properties in the Balance Sheets of the country. Related service price indexes for the land and structure input components of a commercial property are required in the Production Accounts of the country if the Multifactor Productivity of the Commercial Property Industry is calculated as part of the SNA. The paper reviews existing methods for constructing an overall Commercial Property Price Index (CPPI) and concludes that mostmethods are biased (due to their neglect of depreciation) and more importantly, not able to provide separate
land and structure subindexes. A class of hedonic regression models that is not subject to these problems is discussed.