The Process of Making a Real Estate Price Index
The real estate sector is deeply intertwined with the overall economy. An increase in the real estate sector causes a corresponding increase in the GDP of a nation. Hence, the decrease is real estate activity also causes economic mayhem. It is for this reason that real estate needs to be monitored carefully by governments. By monitoring the real estate sector, the government can identify issues related to real estate before they become big or important. These issues can then be rectified with the use of fiscal and/or monetary policy. However, the issues need to be identified before such a resolution is reached. Hence, there is a need for a real estate price index.
Ideally, such an index serves as the barometer for the entire market. However, construction of real estate indices is difficult because of very nature of the underlying asset. In this article, we will discuss some of the common difficulties that are faced during the creation of real estate price indices.
Common Problems Associated With Creation of a Real Estate Price Index
Methods of Creating a Real Estate Price Index
The bottom line is that different methods can be used to create real estate indices. The choice is made depending on the availability and accuracy of data. It is also apparent from this article that real estate indices function very differently when compared to other indices.
Authorship/Referencing - About the Author(s)
The article is Written By Prachi Juneja and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.