APPENDIX 1 UPDATING THE WEIGHTS AND STRATIFICATION VARIABLES IN THE RESIDENTIAL PROPERTY PRICE INDEXES (RPPIs)


INTRODUCTION

1 The purpose of this appendix is to describe the process used to update the weights and the variables used to stratify the indexes. This process ensures the RPPIs continue to (a) provide a robust and accurate macroeconomic indicator of residential property price inflation; and (b) support the compilation of the non-financial assets component of the Household Balance Sheet in the Australian System of National Accounts (ASNA).

2 Every five years, following the availability of data from the Census of Population and Housing, an index review is undertaken to update the quantities of dwellings that underpin the weights of the indexes. It also provides an opportunity to update the variables used to stratify the indexes. The most recent index review occurred in relation to data from the 2016 Census and has resulted in the introduction of Series 4 of the indexes from the December quarter 2018 issue.


STRATIFICATION

3 The RPPI, HPI and ADPI all use a stratification approach to control for changes in the composition of properties bought and sold over the reference period.

4 The method of stratification used for Series 4 has not changed as a result of the index review. This means that suburbs continue to be grouped into strata based on their long term median price (the median price of the suburb between the 2011 and 2016 Census) and their Socio-Economic Index for Areas (SEIFA) score (2016) on the Index of Relative Advantage and Disadvantage. This approach balances homogeneity of suburbs within the same stratum with sufficient sales observations to construct reliable measures of price movements. For further information on the stratification approach used in the Indexes, see Residential Property Price Indexes: Concepts, Sources and Methods, Australia (cat. no. 6464.0).

5 As a result of the updated variables for stratification, the number of strata for both the HPI and the ADPI has changed in some cities.

Table A1.1 Number of strata, Series 4 (from the December quarter 2018)
	HPI	ADPI
Sydney	21	13
Melbourne	16	14
Brisbane	16	9
Adelaide	13	11
Perth	13	12
Hobart	8	6
Darwin	5	5
Canberra	8	8

Table A1.2 Series 4 Weighting Pattern, (a), percentage contribution to eight capital cities
	RPPI	HPI	ADPI
Eight Capital Cities	100.0	100.0	100.0
Sydney	40.1	35.5	51.5
Melbourne	30.6	31.8	27.6
Brisbane	10.5	11.9	7.1
Adelaide	5.8	6.4	4.4
Perth	9.2	10.4	6.4
Hobart	1.1	1.3	0.5
Darwin	0.5	0.5	0.5
Canberra	2.2	2.3	1.9
(a) Components may not sum to 100.0 due to rounding

Table A1.3 Series 4 Weighting Pattern (b), percentage contribution to RPPI
	RPPI	HPI	ADPI
Eight Capital Cities	100.0	71.4	28.6
Sydney	100.0	63.2	36.8
Melbourne	100.0	74.2	25.8
Brisbane	100.0	80.6	19.4
Adelaide	100.0	78.5	21.5
Perth	100.0	80.3	19.7
Hobart	100.0	85.9	14.1
Darwin	100.0	69.4	30.6
Canberra	100.0	74.8	25.2
(b) Components may not sum to 100.0 due to rounding