1 Department of Finance, Copenhagen Business School2 Boligforeningen AAB3 Nykredit
The presented house price index for Denmark from 1860 to 2012 has been constructed by analysing already published data from Statistics Denmark. Houses are heterogeneous assets, and nowadays they differ in many aspects from houses in 1860. Due to improved building quality, urbanization and the revolution of the transportation, they are now situated in much larger cities and fewer houses are found in the countryside. Furthermore the houses are more and better equipped. Obviously, conceptual and practical difficulties exist in separating the value and the price of the houses when the development in house prices is depicted. The Danish house price index covering all the 152 years is in reality a simple average sale price index for houses. From 1920 on it was possible to construct another and a “pure” house price index, based on the Sales Price Appraisal Ratio (SPAR) method. Several challenges for creating the house price index arose, especially in converting the previous registered house prices in the statistics into current market prices. In real terms, the average sale price index increased more than the SPAR index for the years where the two indices were compared, and the difference express the qualitative improvement of the sold house through the years. The SPAR index contains long house price cycles, and the unique recent bubble is observed. The development in real prices holds no arguments for the SPAR index will increase in the long run. Already published long house price indices exist for Herengracht (the Netherlands), Norway, USA, France, and recently also Australia. Until now, the here presented house price index for Denmark is the longest countrywide house price index ever been published, based on official data, and qualitatively probably the best long house price index.