Building cost index
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Building cost index
0.2 Subject area
Prices and Consumption
0.3 Responsible authority; office, division, person etc.
Price Statistics, Statistics Iceland
Telephone: +(354) 528 1209
0.4 Purpose and history
The building cost index shows changes to the cost of building a specific type of house (18 apartment house) in the capital area in accordance with law no. 42/1987. Value added tax refunds for work carried out on construction sites are accounted for in the index compilation.
The building cost index has been compiled since 1939, however the base has been changed five times, in 1955, 1975, 1983, 1987 and in 2010. Statistics Iceland determines the base in consult with building professionals and experts.
0.5 Users and application
The building cost index is mainly used for indexation of contracts in the construction industry. Other uses are:
· To evaluate price changes in the construction industry
· In updating fire insurance value of real estate for public institutions such as Icelandic Property Registry as well as insurance companies
· In planning and cost estimation
· In deciding road building fees
· Estimating present values of various types
· Indexation of rent
The base of the index is the building cost of a particular "index house", which is an 18 apartment house in the capital area.
Every month prices are surveyed in numerous firms and stores, which sell goods and services for construction. Price quotations are reported electronically through web servers at Statistics Iceland.
0.7 Legal basis for official statistics
The index is calculated according to act no 42/1987, and later amendments.
0.8 Response burden
By collecting data electronically the response burden is minimised. Parties that report prices on few items list their prices in web forms at Statistics Iceland's website. Where more data is to be delivered parties are given the alternative to hand in electronic price quotations in attachments through the website, in which case the attachments must be finished according to Statistics Iceland's requirements. The response burden is highest by the initialisation of a new base, when goods and services are chosen for quotations. However the response burden of filling out a web form or handing in electronic attachments is small.
0.9 EEA and EU obligations
There are no regulations on building cost indices in EEA regulation.
1.1 Description of content
The building cost index is an input price index. Price measurements cover all inputs, i.e. labour, materials, renting of machinery, transport cost etc., which are needed to construct a residential building.
1.2 Statistical concepts
The index is a fixed base Laspeyres index. Geometrical means of price quotations are calculated. Subindices are published by building stages, in accordance with Icelandic Standard 51 (ÍST51), by trade and by input categories.
2.1 Reference periods
The index is based on pricing in the middle of every month and counts for the month after calculation according to laws pertaining to the building cost index.
2.2 Process time
The index is usually published on the fifth weekday from the beginning of price collection in the middle of each month.
The index is published according to the advance release calendar at 9:00 am.
The release calendar for each year is published on the website of Statistics Iceland in November.
2.4 Frequency of releases
The index is published monthly.
3.1 Accuracy and reliability
The index measures accurately all costs from building the index house. The index house is chosen based on how descriptive it is when it comes to general practises in building methods. The contractors who built the index house put together a detailed breakdown of all inputs. Goods and services are chosen to best fit descriptions given in the breakdown as well as being based on comparability with quality standards. The selection of goods and services is subject to modification when new products replace older ones in the construction market. The collection of goods and services measured in the index should therefore at any given time represent well building inputs being used within the construction industry. Nevertheless, the index is a fixed base index and all major changing tendencies in construction are only incorporated through a rebase of the index.
Labour costs are estimated using wage contracts for employees in the building industry.
3.2 Sources of errors
Coverage error: The base for the building cost index is an actual apartment house. It is chosen to be representative of current building techniques; however, constructions inevitably vary in one way or another from the index house. Building techniques also evolve over time, presumably leaving the index base less and less representative the older it becomes.
Errors due to obsolete inputs: Inputs for the index house must meet requirements put forth in the index base. Sellers of construction products and services give price quotations for solutions commonly chosen by contractors and industry experts. The sellers replace products when they become obsolete, which works to minimize errors of obsolete inputs. These errors can still be found if appropriate upgrades in the product selection are not being made.
Sampling error: Sellers of construction products and services are handpicked into the sample with the aim of covering the index base as well as possible. Price changes reported by a seller of a particular product may not be representative for all comparable products; however efforts are made to have at least three independent price quotations for every index base item to diminish sampling errors.
Measurement errors: The risk of measurement errors occurring is greatest when new individuals take over the responsibility of submitting price data. In most cases price measurements are directly linked to the seller's product numbers, so the probability of wrong prices being reported is not high. With many sellers reporting prices via web forms there is always a risk of typing errors occurring.
Processing errors: As price data is received electronically, the risk of typing errors during processing is diminished. Price data is imported directly into a data base where further processing occurs. Processing errors can occur when data errors are not detected or when products are being replaced.
3.3 Measures on confidence limits/accuracy
No specific measurement of the extent of errors in the building cost index has been carried out.
4.1 Comparison between periods
Easy within index base time. Index numbers are comparable between bases by chaining. Changes to methodology, significant changes to classification, and considerable changes to materials and methods in the construction industry can reduce comparability over longer periods.
4.2 Comparison with other statistics
No comparison of the building cost index and other indices has been carried out.
4.3 Coherence between preliminary and final statistics
Preliminary statistics are not published.
5.1 Forms of dissemination
· News released on Statistics Iceland's website
· Statistics, categorised statistical web tables
· Statistical Series, Hagtíðindi
· Statistical Yearbook of Iceland, Landshagir
· Telephone answering services
5.2 Basic data; storage and usability
Basic data is stored by Statistics Iceland and is not accessible to anyone other than employees of the price statistics.
Reports are published on the web and in the Statistical Series if needed.
5.4 Other information
Further information on the building cost index is provided by the price statistics division. Please e-mail your inquiries to firstname.lastname@example.org or call +(354) 528-1200 for further information.
© Hagstofa �slands, �ann 26-1-2018