The New Housing Price Index (NHPI) is a monthly series that measures changes over time in the contractors' selling prices of new residential houses, where detailed specifications pertaining to each house remain the same between two consecutive periods.
Data release – December 12, 2013
The New Housing Price Index (NHPI) is a monthly series that measures changes over time in the contractors' selling prices of new residential houses, where detailed specifications pertaining to each house remain the same between two consecutive periods. The survey also collects contractors' estimates of the current value (evaluated at market price) of the land. These estimates are independently indexed to provide the published series for land. The residual, (total selling price less land value), which mainly relates to the current cost of the structure is also independently indexed and is presented as the estimated house series.
The NHPI is used by housing economists, universities and the general public to track and comprehend events and trends in this important component of the construction sector. Within Statistics Canada, components of these series are used in the calculation of some elements of the Consumer Price Index. In addition, the series are used by the Canadian System of National Accounts in deflating the value of the national housing stock. Due to the level of geographic detail provided and the sensitivity to changes in supply and demand, the NHPI series are of particular interest to the real estate industry for comparison with changes in values of houses sold in the resale market. The information provided by the NHPI is also useful to building contractors, market analysts interested in housing policy, suppliers and manufacturers of building products, insurance companies, federal government agencies such as Canada Mortgage and Housing Corporation (C.M.H.C.), and provincial and municipal housing agencies responsible for housing policy.
For the NHPI, the universe consists of builders in 21 metropolitan areas who mainly build single unit houses in such volume or in such a fashion that they can report selling prices for comparable transactions.
The interviewers use a simplified price report to obtain the necessary information on the total price and the estimated market price of the land component, as well as detailed characteristics of the selected house models being priced. A description of the physical and non-physical characteristics of the selected house model and the corresponding total selling price of the house and land is requested as well as an estimate of the land value (defined as the market price). A residual value (total selling price less land value) which relates to the current cost of the structure (house) is then calculated. The price report was developed in the early 1980's, with input and feedback from the respondents and the Canadian Home Builders' Association.
This is a sample survey with a longitudinal design.
The sample of builders for each metropolitan area is determined with the use of building permit data. The total number of builders selected in the sample for each city represents at least 15% of the total building permit value of that city. A small portion is also determined through the use of local market intelligence. Where possible, prices are collected from builders who develop entire subdivisions, usually on large tracts of land. Builders producing fewer units can also be included where comparable models can be priced over a period of time. The sample for a given builder is structured in such a way that the price changes of the sample are representative of the price changes of the builder's total sales of housing units.
Responding to this survey is mandatory.
Data are collected directly from survey respondents and derived from other Statistics Canada surveys.
The collection of the selected house models and price information is conducted through the use of personal interviews carried out by interviewers who are based in the regional offices of Statistics Canada. Face-to-face interviews are conducted quarterly while telephone interviews are used in the intervening months.
In the day-to-day collection and processing of the NHPI, great emphasis is placed on the examination and evaluation of prices. Subject matter specialists closely watch developments in the markets. They review the behaviour of the reported price changes, both to validate them directly and to ensure they are representative of the price movement as a whole. Outliers and incorrect or suspicious prices are identified during the initial data processing and then verbal follow-ups are carried out by the interviewers with the respondents to ensure the appropriate information has been obtained.
Imputation rarely occurs for the NHPI, as the response rate is virtually 100%. However when required, a missing or delayed price will be imputed by carrying the previous month's reported price forward.
Separate weights are estimated annually at the level of the metropolitan area for the house component, the land component and the total selling price series using building completion data. Essentially, a price adjusted moving three-year average of the value of building completions for each metropolitan area is calculated for the house component, and then aggregated up to provide provincial and national indexes. In the case of land, the house to land ratios obtained from the NHPI are employed to estimate the corresponding land value data, also using a three-year moving average and aggregated in the same way. The total (house and land), is then calculated using all this information.
To prepare a contractors' selling price index for a metropolitan area, price reports from the sample of builders are given equal weights in index calculations. Amongst metropolitan areas, weights are derived from housing completions data.
Through discussion with the builders, models are selected and tracked. These models are identified as representative of the current construction portfolio of each builder. Prices include the provincial value added taxes on materials when applicable. However, Value Added Taxes such as the Federal Goods and Services Tax, the Quebec Sales Tax and Harmonised Sales Tax are excluded. In addition to pricing data, detailed information is obtained describing physical and non-physical characteristics of each selected house model. This is considered to be an important data source which assists the assessment of quality changes in terms of dollars and cents. In the new housing price survey, reported prices are adjusted for changes in quality of structure and land. This is important because the NHPI attempts to measure changes in price over time of identical houses in consecutive periods. Most often the estimate of the value of the quality change provided by the respondent is used to adjust the reported price to an estimate of "pure" price, unaffected by quality change.
The NHPI is comprised of both elemental and aggregate calculations. The elemental index is calculated using the Jevons formula (equally weighted geometric mean) combining housing models quotes across builders. The aggregate NHPI is the weighted combination of city estimates to national totals for each series component (house, land, total). The index used for this calculation is a fixed weighted Laspeyres type (Lowe) formula.
Statistics Canada is prohibited by law from releasing any information it collects which could identify any person, business, or organization, unless consent has been given by the respondent or as permitted by the Statistics Act. Various confidentiality rules are applied to all data that are released or published to prevent the publication or disclosure of any information deemed confidential. If necessary, data are suppressed to prevent direct or residual disclosure of identifiable data.
Collected data are converted to a price index and data are released as such, so that it is not possible to identify the suppliers of the original raw price information.
The indexes published are final.
The statistical accuracy of this index depends on price and value data. Price data are obtained from a sample survey. Value data mainly rest on the quality of the building completion data, gathered by the Investment and Capital Stock Program of Statistics Canada. Both kinds of input data are subject therefore to their own errors.
In terms of price data, it has been acknowledged since the inception of the NHPI house and land sub-aggregate series that the house-to-land split can contain some level of respondent bias. This is due to the very difficult task of separating the total value of a new house into a land portion and a structure portion. The allocation of value in such a circumstance may be easy for one builder to provide and conceptually difficult for another to determine. Nevertheless, all efforts are made to obtain, verify and edit such information in concert with the builder.
Though the NHPI uses a sample survey methodology to obtain the necessary information, confidence intervals are not currently estimated, due to the longitudinal nature of price index series. Indexes for higher and lower levels of aggregation are considered to be statistically reliable.