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How Well Do Australian Home‐Owners Know the Value of Their Home?
Author(s) -
Melser Daniel
Publication year - 2013
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/j.1467-8462.2013.00715.x
Subject(s) - estimation , value (mathematics) , differential (mechanical device) , business , demographic economics , economics , labour economics , statistics , mathematics , engineering , management , aerospace engineering
Owners' estimates of the value of their home are widely used in research and form the basis of much of our understanding of household wealth. But are these estimates accurate? Using hedonic methods and data from the Household, Income, and Labour Dynamics in Australia Survey, I investigate this for Australian home‐owners. The findings indicate that owners over‐estimate their home's value by around 2.5 per cent or $100 billion economy‐wide. Importantly, the extent of mis‐estimation depends upon the age of the home‐owner and the size of the home. Thus, some caution needs to be exercised when comparing reported housing wealth across groups, as part of these differences may reflect differential estimation errors.