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Ebook: Measuring and explaining house price developments
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This study discusses ways of measuring and explaining the development of house prices. The goal of the research underpinning this dissertation was to develop a methodological framework for studying these developments. This framework relates, first, to correcting for changes in the composition of dwellings and, second, to the fundamentals of the price development. Using the weighted repeat sales method and sale price appraisal ratio (SPAR) method, house price indexes were developed for the Netherlands. Both the Dutch land registry office and Statistics Netherlands publish the SPAR based house price index monthly. To explain and predict changes in prices, a house price model is presented. As suggested in literature on western housing markets, the Dutch house price developments can be explained by demand-oriented short-run term variables and a long-run term variable. Using the house price model, this work identifies the fundamental factors in the development of house prices, a long-run equilibrium between interest payments and income, and the weak relationship on an aggregated level between house prices and newly built dwellings.
Exceptional, what does that mean? The fact that I am getting a PhD, is that exceptional? And is exceptional a deviation from what is normal? But what is normal? Is it the same as average? Questions. Questions to which science provides answers. But what is science? What is scientific research?
These are questions that you ask yourself when you are learning to be a scientist. However, when I started out at OTB Research Institute for the Built Environment in May 1988, I had not been educated as a scientist. Johan Conijn and Oscar Papa hired me as a member of the research staff because of my statistical knowledge. At that time, I shared a computer with Johan and SPSS slowly displayed – in a little blue frame – the current record number in the database.
The first study I was involved in made a historical and spatial analysis of market-sector dwellings and included a regression model for estimating the number of housing starts in the market sector
Conijn, J.B.S. and P. de Vries (1989) De vrije-sectorwoningen: een historische en ruimtelijke analyse, Volkshuisvestingsbeleid en Bouwmarkt 6, Delft, DUP.
To compile the proper time series, I delved into the archives of Statistics Netherlands for days on end. That information later turned out to be important for explaining the development of the house price. In those days I was not a scientist yet.
That all changed in 1999. I wanted more responsibility and less of a research task. I took part in an assessment and it revealed that I had more than enough ability to be a good scientist. Peter Boelhouwer and Johan Conijn proposed that I follow the post-doctoral program in Housing, Urban and Mobility Studies. There I grappled with philosophy of science, argumentation, and methods and techniques. I learned the difference between exceptional and normal. From Karl Popper I learned that a scientist makes observations, formulates a theory, derives premises from it and then tests them; from Henny Coolen I learned statistical testing. In 2001 I graduated with good grades. I had to get used to the idea that I could call myself a scientist.
I test hypotheses mainly with the aid of statistics. Statistical relations are strengthened as soon as exceptional observations are left out of the picture. These outliers distort the more-or-less normal relations that I, as a scientist, am looking for to make generalizing statements. But wasn't I an exception in 1999!? I was a researcher without a university education who wanted to become a scientist. That is not commonplace. Still, Johan Conijn and Peter Boelhouwer saw the exceptional pathway that I then took and ultimately led me to this dissertation. For that I remain grateful to both of them. They could have overlooked it because it lies too far off the normal scientific career track.
One nagging question remains, whether I am exceptional. I think I am. As a humanist I believe that people distinguish themselves from one another in that each person forms his or her own moral judgments and is guided by one's own norms and values. In this sense, every person is exceptional, just as Hugo Priemus pointed out back in 1978 that every dwelling is unique and exceptional Priemus, H. (1978), Volkshuisvesting; begrippen, problemen en beleid, Alphen aan den Rijn, Samsom Uitgeverij.
You might then wonder, what does the average house price mean?
Paul de Vries
November 2010