The technical mission of the International Monetary Fund (IMF) has drawn up recommendations for the State Statistics Service of Ukraine (State Statistics Service) in connection with its plans to implement a new hedonic method for the formation of price indices on the residential real estate market – taking into account important characteristics of housing evaluation, for example , such as its location.
“The agency (State Statistics Service) receives data on the secondary market directly from the OLX platform, with which a memorandum of understanding was signed in 2023. The mission offered to ensure that the State Statistics Service receives unfiltered data from the platform, which includes information on real estate of less than 30 square meters. m and more than three rooms”, – it goes, in particular, in the reportwhich was published on August 2 on the IMF website based on the results of the mission on April 8-12 this year.
According to the document, in order to improve the quality of the real estate price index in Ukraine, the State Statistics Service decided to use new data sources and an updated approach using hedonic regression. This will make it possible to increase the accuracy and completeness of the index due to more detailed geographical data, taking into account the qualitative characteristics of housing that affect the price, and will bring the methodology of the Ukrainian index closer to European standards.
The hedonistic approach involves preserving the key pricing characteristics of housing during the formation of the price index: price offer, location, housing attributes (year of construction, materials, number of floors, area, etc.). Not all characteristics are taken into account when compiling the index due to the receipt of incomplete information, but the data on some of them is sufficient for the application of the new method, according to the IMF. It is proposed to expand the data coverage and include both apartments and houses in the index.
You should also collect more detailed information about the location of housing: in addition to the city and region, you can also take into account administrative districts and zip codes, since these indicators significantly affect the pricing indicated in the report.
It is noted that currently the State Statistics Service collects data on the primary market manually, by collecting online data on the websites of developers. Mission specialists recommend expanding data collection in regions with low representativeness.
The document recommends excluding from the index duplicate data for existing real estate objects, but leaving them for new housing. This decision is explained by the fact that developers can offer similar apartments at the same price. For 2023, 75 duplicate ads were found on the secondary housing market and 17 on the primary housing market.
It is also suggested to consider the possibility of stratification (grouping – IF-U) of data. During the mission, experimental strata were formed based on six regions and two types of real estate (primary and secondary market), as well as experimental quality-adjusted hedonic indices for regional strata. The State Statistics Service should take these data into account when forming the housing price index based on the results of the first quarter of 2024, the report says.
“The State of Ukraine should hold both internal and external consultations to make a decision on the appropriate stratification of data. After implementation, it is not recommended to change the stratification. To ensure that stable indices can be compiled, each stratum must contain a sufficient number of observations from each quarter. In addition, individual models can be developed for each stratum, which will allow finer quality adjustments to be made,” the recommendations state.
The report emphasizes that the State Statistics Service is recommended to review past real estate price indices in accordance with the new approach to generate more accurate retrospective data for further analysis. Currently, the department’s policy does not provide for revision of published indexes. In addition, it is proposed to change the structure of statistical data publications, in particular to publish quarterly, annual and half-yearly rates of price growth, as well as long-term dynamics for the overall index and sub-indices up to a certain year.
Ukraine will consider the possibility of revising past indices and the structure of publications after the end of the war, the report notes.
According to the document, representatives of the State Statistics Service participated in the mission and received practical training on the application of the new approach.
“The mission will continue to provide support to the authorities as necessary until the agreed work plan is implemented (…) If the authorities implement the recommendations outlined in the report, the methodological and technical specifications of the house price index will largely comply with European legislation. “Technical support will contribute to the further harmonization of price indices,” the document states.
