Producer Price Index Manual: Theory and Practice ... - METAC

Producer Price Index Manual
duced over time, and often unique. Even with the
same type of building, (for example an office building)
outputs can differ according to design, floor
area, building materials and construction method.
10.142 Furthermore, projects differ according to
the underlying tasks. Projects entailing mostly
renovations and repair will be quite different from
those concerning new buildings. The scope of projects
may vary in terms of the elements of construction
required. Some services that are projectdependent
include demolition and design.
10.143 The location of a project also can have a
major impact on the price. In many countries, building
prices may reflect urban, suburban, and regional
factors.
10.144 Although the building price may reflect all
the characteristics of the construction service, the
fundamental problem is comparing building output
prices from one period to the next.
10.145 There are many concepts of building price.
The basic price, the preferred valuation of output in
1993 SNA, is the amount receivable by the producer
from the purchaser for a good or service produced,
calculated as output minus any tax payable, plus
any subsidy receivable. 6
10.146 The ABS uses the basic price of building
output, which covers the amount receivable by the
prime contractor from the client for the building,
excluding taxes, subsidies, the value of land, design,
and other professional fees.
I.1 House building
10.147 ABS compiles a price index for house
building using the matched model method. More information
on the matched model method can be
6 Other concepts of building price include the producer’s
price, the purchaser’s price, and the seller’s price. The
producer's price is the amount receivable by the producer
minus any value-added tax, or similar deductible tax invoiced
to the purchaser. The purchaser's price is the producer's
price plus the value of any non deductible valueadded
tax payable by the purchaser. The seller's price reflects
all the elements that contribute to the price paid by the
final owner (Organization for Economic Co-operation and
Development and Eurostat, 1997, pp. 14-22). It would include
the purchaser's price plus the value of land, design and
other professional fees, the client's profit margin, and other
costs.
found in Chapter 1, Sections I, K, and L, and in
Chapters 7 and 8. This approach is used for houses
because of the great degree of regularity in their design,
size, construction materials, and construction
methods, and the fact that most home building
companies in Australia specialize in the construction
of a range of well-specified models. A representative
sample of home models is selected in each
city, prices obtained for each period, and the price
movements for each model weighted together.
10.148 Constant quality is preserved by calculating
price movements on a matched sample basis,
that is, the price movements between adjacent periods
are based on the same models in each period. If
the specification of an individual model changes
substantially or a price cannot be obtained, then that
model is excluded from the calculation of price
movement. Adjustments are made to raw prices to
compensate for any minor changes in specifications.
For example, if a particular model is essentially
the same as in the previous period but the current
price reflects a new addition or special feature,
then the price of the model is adjusted using standard
quality adjustment principles so that the model
can be matched directly with that in the previous
quarter.
I.2 Residential building other than
houses and nonresidential building
10.149 The building output can be defined as a
whole final structure or as a collection of particular
elements that constitute the construction process.
These elements should be narrowed down to include
only those that would generally be covered in
a standard construction contract between client and
builder. Examples of excludable elements are any
site works (such as demolition, land clearance,
roads), external services (such as drainage, water
and electricity connection), design and other professional
services.
10.150 Of the several compilation methods available,
the ABS has chosen a method based on a
breakdown of building construction into a set of
common components. This so called component
cost method treats building output as a set of standardized
homogenous components representing
subcontracted work-in-place. This and other methods
for compiling building price indices are described
in OECD and Eurostat (1997).
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