RDP 2014-04: Home Price Beliefs in Australia 3. Data

Our benchmark measure of the market value of the home is derived from unit-record data provided by Australian Property Monitors (APM).^[5] Our measure of self-reported home valuations is obtained from the Household Income and Labour Dynamics in Australia (HILDA) Survey. Details on the exact location of properties are available in the APM sales dataset, but are not available in the HILDA Survey. Accordingly, we compare self-assessed home values to market values at the postcode level rather than at the level of the individual home.

To account for the fact that homes that are sold each period are potentially different to the homes that are self-assessed, we use hedonic regressions as discussed in Section 4 to control for the different characteristics of properties that are sold or valued.

3.1 Home Sale Prices

Data from APM – which constitutes a near-census of all housing sales – are used to estimate the value of households' homes. These data provide the benchmark for inferring the accuracy of self-assessed home values. The dataset contains nominal sale price information, including the exact location and home characteristics, for homes sold in Sydney, Melbourne and Brisbane. Table E1 details the construction of our samples, and Appendix E shows that our results are robust to the imposition of exclusion restrictions that reduce the effects of either small samples or outliers.

The sale price data cover the period 1992 to 2012 and comprise around 3.9 million observations. In comparing these prices to self-assessed home values we match the data by the postcode and the quarter in which the sale and valuation occurred.

3.2 Self-assessed Home Values

To measure households' valuations over their own home, data from the HILDA Survey over the period 2002 to 2011 are used. The survey is a nationally representative annual household panel that began in 2001 with around 7,700 responding households.^[6] It contains questions on household finances, employment and wellbeing.

Every year surveyed homeowners are asked to provide a self-assessed home value by responding to the question:

Do you know what the approximate value of your home is? I mean, how much would it bring if you sold it today? Include land, home improvements, and fixtures (such as curtains and light fittings) usually sold with a home. Exclude home contents.

In total, over the period 2002 to 2011 there are 18,964 self-assessed home valuations.

Footnotes

For more information about these data see the Copyright and Disclaimer Notices at the end of this document. [5]

We deliberately choose a longer sample period for the APM data than for the HILDA data in order to increase the precision of our hedonic estimates and to allow us to better construct repeat-sales estimates of home prices, which we use later in the paper. [6]