Objectified housing sales and rent prices in representative household surveys: The impact on macroeconomic statistics

Reliable macroeconomic housing and wealth statistics as well as counterfactual analyses across housing tenure status require hypothetical sales and rent prices for properties off the market reflecting current market conditions and representing the entire housing stock. We replace subjective values reported by participants in the Luxembourg Household Finance and Consumption Survey by objectified values imputed via hedonic models estimated on observable market data. We find that the participants’ tendency to over- and under-report values is strongly correlated with tenure length, tenure type, dwelling type, household income and wealth. We find shifts in the wealth distribution, detect large regional variation in price-to-rent, price-to-income and rent-to-income ratios as well as significant affordability concerns: only 18% of all renting households could theoretically afford to purchase the dwelling they currently rent at market conditions. These renters are usually younger, at the top of the wealth and income distribution, and reside outside Luxembourg City.

Keywords: Macroeconomic Statistics; Subjective Assessments; Surveys; Measurement Errors; Housing and
Rent Markets; Housing Wealth; Affordability
JEL codes: E58; G51; R21; R31.