Page 453 - Invited Paper Session (IPS) - Volume 1

IPS176 Thomas A. K.
3. Result
CPPIs are compiled on the basis of town-specific price trends and
weighting schemes. In particular, the percentage change of the price index
according to definition in period ,=1,…,, is given by
0
1

∆p = ∑ ∑ ∆

· 0 0
=1 =1
where is the weight of object type ,=1,…, , in the town or city ,=1,…,,

according definition and ∆p is the percentage change in the price for
object type in town or city in period . It is worth noting that the same town-
specific price changes are considered for rental housing owned by enterprises
and private households.
Fig. 2

As depicted in Fig. 2, the aggregate price trends of commercial property
in German towns and cities vary somewhat depending on the chosen
definition. Averaged over the whole period from 1995 to 2018, the price
change is 2.0 per cent per year in the case of the CRR definition. This is lowest
because multi-family dwellings which experienced the strongest price increase
amongst all object types are completely excluded. The CPPI according to the
ESRB definition rose by 3.1 per cent per year on average. This is exactly the
same rate as in the case where the broadest definition of commercial real
estate is chosen. This similarity can be explained by recalling that the share of
multi-family dwellings is uniformly one-half in both definitions and noting that
the price trends of the remaining components (which are, in the ESRB, office
and retail to the overwhelming part and, in the broadest concept, office and
retail as well as houses and apartments in roughly equal parts) shared more
or less the same long-run price trends. The CPPIs of the various definitions
point to the same direction of change in more of 90 per cent of the years

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