Estimation of owneroccupied dwelling services in The System

Estimation of owner-occupied dwelling services in The System of National Accounts Irina Solovieva ROSSTAT National Accounts Division

SNA 93: method of equivalent rent «The value of the output of owner-occupied dwelling services is measured at the estimated amount of rent paid by tenants for analogous dwelling…» The Criteria of the equivalent rent method application: 1. more than 10% of dwellings are privately rented; 2. distinction between rents for private and government owned dwelling is no more than factor of three различие между арендной платой за частное и государственное жилье составляет менее 3 -х раз 2

The user cost method: Output of services of owneroccupied dwellings Intermediate consumption Other net taxes for production Consumption of the fixed capital Gross return Net return 3

Formula for calculating gross return of owner-occupied dwelling services Ut = [CPI*rt + dt ] Wt, где Ut – gross return in the period t CPI – Consumer Price Index в период t rt – rate of return in the period t in real terms dt – rate of consumption of fixed capital for dwellings in the period t Wt – value of stock of dwellings in the average market prices of the period t 4

Formula for calculating real rate of return where rt – real rate of return in the period t, rn – nominal rate of return in the period t, CPI – Consumer price index for goods and services in the period t 5

Estimation of market value of dwellings by the method of comparison of sales Comparative approach is the summation of objects’ value estimation method based on comparison of estimation objects with analogous objects in respect of which there is an information on transaction prices. Estimation of market value of dwellings is carried out by multiplying associated area of dwellings distributed in two ways – wall’s material and year of construction, by the relevant prices separately in apartment houses and private houses. Estimation carried out for urban and rural settlement. 6

Main sources of information for calculating market prices of dwellings 2. 1. Form of federal statistical observation № 1 -stock of dwellings “Information about stock of dwellings” – annual, submitted by organizations of technical account and technical inventory Form of federal statistical observation № 1 -DM “Information about level of prices in dwelling market” (quarterly) submitted by legal entity and individual entrepreneur conducting real estate transactions in territorial centers and individual cities subjects of Russian Federation (on selective basis) 7

Form of federal statistical observation № 1 -stock of dwellings “Information about stock of dwellings”, annual § § Distribution of the existing dwelling stock − − − § At the end of the year по состоянию на конец года of cities and towns and rural areas Of certain individual buildings and apartment dwellings Of wall material (stone, brick, panel, modular, monolithic, mixed, wooden, other) By time construction of dwellings Availability of emergency and dilapidated dwelling stock *** The results of the census are used to distribute the available houses on the two related grounds-the material of the walls and year of construction 8

Form of federal statistical observation № 1 – DM “Information about level of prices in dwelling market”, quarterly, on selective basis Price per unit area of dwellings in the secondary market for its characteristics: Wall material 1) 2) 3) 4) Categories of dwellings Low quality Standard Improved planning Elite

Correction factors to the price of dwelling sold Information for calculating: Информация для расчета: § Form of federal statistical observation № 11 “information about availability and movement of main stocks and other non-financial assets” and Balance of fixed capital in average annual prices for the fiscal year (in order to determine the cost emergency and dilapidated dwelling stock and calculate current market price of dwellings in average annual prices of fiscal year § Form of federal statistical observation № 1 - “Information about dwellings built by people” and № С-1 “Information about commissioning of buildings and structures’ (in order to determine average price of 1 square meter of total area of private dwellings) § According to the expert-evaluators ( in order to determine the price of 1 square meter of total area of wooden dwellings and dwellings located in rural area

Estimation of market value of dwellings Used assumptions: § We think apartment houses and private houses from all wall materials built until 1970 inclusively (and wooden and mixed until 1995 inclusively) are dwellings of low quality, accept prices for dwelling of appropriate type on wall material and ‘low quality dwelling’ category § Stone, brick, panel, modular dwellings built in the period from 1971 to 1995 – prices for a dwelling of appropriate type and by category ‘standard’. Built after 1995 – prices for a dwelling of appropriate type by wall material and category ‘improved planning’ § Wooden, mixed and other houses built after 1995 – prices for a dwelling of appropriate type by wall material and category ‘standard’ § Monolithic dwellings built after 1995 – prices for a dwelling of appropriate type by wall material and category ‘elite’

Calculation stages of current market price of dwellings § Formation of the initial information on the availability of dwelling stock and prices in secondary market of residential § Calculating average market value of 1 square meter of total area of dwellings by separate groups by making amendments and adjustments in average dwelling prices in secondary market § Distribution of dwelling stock into groups by following criteria: city/town, detached/condo, wall material, construction year § Calculating of current market value of dwellings to the end of fiscal year § Correction of current market value of dwellings in value emergency and dilapidated dwelling stock § Calculating of current market value of dwellings of the sector ‘household’ at the end of fiscal year § Recalculation of current market value of dwellings at the end of fiscal year in average annual prices of fiscal year

Experimental calculation of owner-occupied dwelling services bln. Rub. 2010 2011 2012 456, 4 493, 2 602, 4 14, 2 15, 0 18, 0 470, 6 508, 2 620, 4 14, 0 15, 9 18, 0 1, 069 1, 084 1, 051 2, 5 87 482, 5 91 796, 2 100 880, 1 1, 72 1, 83 3 850, 3 4 067, 5 4 496, 0 4 334, 9 4 591, 5 5 134, 5 Intermediate consumption 01 02 03 Expenses for current maintenance of owner-occupied dwellings Net insurance premiums paid by owners Total intermediate consumption (01 + 02) Other taxes for production 04 Taxes paid by owner from value of occupied dwelling (taxes for individual property) Gross return 05 Inflation Инфляция (ИПЦ) 06 Return rate on the dwellings for private use , % per year 07 Average annual value of dwellings owned by citizens, in current prices 08 Share of consumption of fixed capital in average annual value of dwellings, % per year 09 Gross return from accommodation in own dwelling 07*(05*06 + 08) Output 10 Value of services for accommodation in own dwelling (03 + 04 + 09)

Distinction in valuation of services for accommodation in own dwelling Current methodology New methodology Intermediate consumption (expenses for current maintenance and repairs of dwellings) Taxes for property Consumption of fixed capital (based on the book value ) ______ √ net return 14

Comparison of dwelling services calculation results obtained on the basis of current and experimental techniques 2010 Share of services for accommodation in 1 own dwellings in total output, % Share of services for accommodation in 2 own dwellings in GDP, % Share of services for accommodation in own dwellings in final consumption of households, % 3 Share of services for accommodation in own dwellings in gross disposable income ДХ, % 4 2011 2012 Calculation by the current method Experimental calculation 1, 1 5, 2 1, 1 4, 6 1, 2 4, 7 1, 7 7, 8 1, 7 6, 9 4, 0 16, 5 4, 0 15, 3 4, 1 15, 2 2, 9 12, 4 2, 9 11, 7 3, 0 11, 5

Change in separate SNA indicators as a result of application of user cost method Change of the cost volume on the results of calculation by approved method 2010 2011 2012 output in 70, 20, 1 household sector (services for accommodation in own dwellings) 4, 7 4, 3 4, 1 Added value 70, 20, 1 household sector (services for accommodation in own dwellings) 4, 8 4, 4 4, 2 Total output in economics 1, 04 1, 03 GDP 1, 07 1, 06 Final consumption of households 1, 13 1, 12 1, 11 1, 10 Gross disposable income of households 16

Method of recalculation of services for accommodation in own dwellings to constant prices 1=2+3+4+5 Intermediate consumption Deflation price index: 2 Materials for current maintenance and repairs of dwellings CPI of building materials 3 Services of current maintenance and repairs of dwellings CPI services of repair of dwellings Maintenance of dwellings CPI maintenance and repair for homeowners Net insurance premiums CPI value of the policy of voluntary insurance against default risk 4 5 17

Method of recalculation of services for accommodation in own dwellings to constant prices (continuation) 6 Other net taxes for production Average annual value of dwelling stock of current year in prices of last year multiplied by the share of taxes on residential buildings in average annual value of dwelling stock of last year 7 Consumption of fixed capital Потребление основного капитала Average annual value of dwelling stock of current year in prices of last year multiplied by the rate of the Consumption of fixed capital 8 Net income Average annual value of dwelling stock of current year in prices of last year multiplied by the rate of net income of last year 9=1+6+7+8 Services of accommodation in own dwellings 18

Comparability of SNA as a result of applying the method of user revenues Change in the dynamics of key macroeconomic indicators at constant prices 2010 2011 2012 Current method Experimental calculation Output in 70. 20. 1 of houshold sector (services for accommodation in own dwellings) 110, 3% 103, 7% 104, 0% 102, 6% 110, 3% 105, 2% Total output in the economy 105, 0% 104, 9% 104, 3% 104, 2% 103, 7% 103, 8% GDP 104, 5% 104, 3% 104, 1% 103, 4% 103, 5% Final consumption 105, 5% 105, 2% 106, 8% 106, 2% 107, 9% 108, 0% Gross disposable income of households 106, 9% 106, 3% 104, 1% 107, 1% 106, 7% 19

Structure of dwelling stock, in % of total 2002 2006 34, 2 2012 16, 5 23, 4 65, 8 76, 6 83, 5 Dwelling stock owned by households State owned and legal entities owned dwelling stock 20

Production and use of dwelling services Output Sector of non-financial corporations ОКВЭД (Russian national Classifier of Economic Activities)70. 32. 1. Management of the operation of housing stock - Maintenance of property owned by households - For hiring and technical maintenance of privatized apartments ОКВЭД (Russian national Classifier of Economic Activities) 70. 20. 1. Lease of own residential property Household sector Intermediate consumption : ОКВЭД (Russian national Classifier of Economic Activities) 70. 20. 1 Final consumption: КИПЦ 04. 4. 4. 02 Maintenance of municipal and departmental hosing КИПЦ 04. 1 Household sector Actual rentals ОКВЭД (Russian national Classifier of Economic Activities) 70. 20. 1. Lease of own residential property КИПЦ 04. 2 Conditionally accrued rent

Directions for further research related to the transition to a new methodology to assess the cost of the housing services in own housing and the market value of fixed capital § Quarterly accounts § Calculation of SNA indicators on regional level § Methods of assessing the cost of housing services of living in state housing § Estimation of consumption of fixed capital for other types of economic activity on the basis of its market value 22