From both Eurostat's and the main users' points of view, a harmonised treatment of the Owner Occupied Housing (OOH) and its prospective inclusion to the HICP would improve the comparability and reliability of the measurement of inflation. Therefore Eurostat has been running a pilot on OOH in which the net acquisition approach has been tested. In the approach, one important element is dwellings prices, which are entered in the index. However, for some uses of house price indices it has been seen desirable to construct indices that would only track the prices of the structures and thus exclude the land price component. Thus Eurostat funded a study in which the objective was to find out if it is possible and how to separate the effect of land prices in house price index data using econometric techniques in the case when land prices cannot be directly observed. The result of this study called "Owner-Occupied Housing - Econometric Study and Model to Estimate Land Prices" is included in the form of a final report of the contractor.
In particular, the study was launched to provide answers to the following questions:
1) Is separation of the land price component and the structure component theoretically feasible and on what grounds?
2) What different approaches are available for the separation?
3) Which of the available method(s) suggested under 2) could be utilised for on-going practical index compilation and why (statistical quality, costs, timeliness, reproducibility, etc.) and moreover what are the prerequisites of the implementation
4) Does the specified econometric model produce reasonable (shadow) price data for the land component?
5) What are the minimum data requirements for the model?