Directorate C: National Accounts, Prices and Key Indicators Unit C.3: Statistics for administrative purposes

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1 EUROPEAN COMMISSION EUROSTAT Directorate C: National Accounts, Prices and Key Indicators Unit C.3: Statistics for administrative purposes Luxembourg, 24 th February 2016 Doc. A6465/16/08 version 1.1 Meeting of the Working Group on Article 64 and Article 65 of the Staff Regulations to be held in Luxembourg on Monday 21 st and Tuesday 22 nd March 2016, in the Bech Building Room Quetelet, starting at 10:00 a.m. on Monday Estate Agency Rent Surveys for 2016 Organisational arrangements; Criteria for selecting residential locations; History of dwelling types included in calculation; Source of indices. - Document prepared in collaboration with ISRP. Paper relating to Agenda item no. 6.2 This document can be found on the dedicated CIRCABC site for meeting delegates:

2 Contents 1. Introduction Organisational arrangements for Fieldwork participation Survey timing Financing arrangements for Criteria for the selection of residential locations History of dwelling types Source of updating indices Survey results Conclusion... 4 Appendices

3 1. Introduction Rent parities are calculated on the basis of market rents obtained from objective surveys of real estate agencies carried out every year by the International Service for Remunerations and Pensions (ISRP) and Eurostat, in collaboration with the National Statistical Institute (NSI) of each country. The current methodology reflects many years of discussion and refinement. The methodology used is based on a six-year moving average model, which takes into account current market rents, as well as rents paid for leases over a longer period. Rent surveys take place in each duty station (usually the capital), for which a cost-of-living index (correction coefficient, PPP, Post Adjustment) is required by the EU, the Co-ordinated Organisations (CO) or the UN systems. 2. Organisational arrangements for Fieldwork participation A strategy to distribute survey work between national statistical institutes and Eurostat/OECD was previously agreed by A6465WG (March 2011 meeting), reducing the frequency of the Eurostat/ISRP fieldwork participation from every year in every location, to once every two years within European locations. However, it was recommended that particular attention should continue to be paid to Brussels and other major duty stations. In the intermediate years, the preparatory phases, fieldwork, and ex-post data processing are ensured by the NSI. Hence, the NSI ensure the appropriate characteristics of the rental market in each location surveyed, i.e. the aspect of representativity, while Eurostat/ISRP participation in the second year ensures comparability between each location and the base city Brussels. On the whole, the tasks of the NSI ensuring fieldwork locally may be summarized as follows: selecting the estate agencies; arranging appointments with participating agencies; selecting appropriate districts for the comparison in agreement with Eurostat and ISRP; conducting the interviews with estate agents; verifying the results; produce and submit final rent data and a report to ISRP for review and eventual incorporation into the global calculations compiled for submission to Eurostat. The planned allocation of tasks for 2016 is included as appendix 1. Following the agreement of their NSI, the rent surveys in Munich, Varese and Luxembourg will pass to the alternating approach in Survey timing The proposed survey timetable for European locations is shown in appendix 2. Launch letters for the 2016 exercise were sent during February. The detailed survey guidelines for 2016 were updated, and included with the launch letters. The guidelines are included as appendix

4 3. Financing arrangements for 2016 EU member states receive nominal funding for these surveys via ECP grants. A contribution towards funding this work in non-eu countries (Turkey, Albania, Bosnia, FYROMacedonia, Montenegro, Serbia) is possible via IPA grants. Specific arrangements are made for the work in non-capital city duty stations (IT-Varese, DE- Bonn, DE-Karlsruhe, DE-Munich) to ensure the work is done in identical manner. 4. Criteria for the selection of residential locations The current methodology highlights that the selection criteria for the areas to be surveyed are of great importance. Dwellings and districts cannot be compared by physical characteristics alone as the duty stations vary enormously in both size and desirability. Practical implementation has to be subject to continual review to ensure representativity is maintained. Areas presently covered by the survey in Brussels as well in all other duty stations are reviewed and agreed bilaterally with respective NSI before the start of each annual round of surveys to take into account the city-specific circumstances. In many duty stations, the location of private international schools may be an important criterion, particularly those recognised in standard COBIS, AEFE and ZfA networks. However this criterion may not always apply because national language schools may be suitable (eg. Anglophones living in Ireland or England, Francophones living in Belgium or France, Germanophones living in Austria or Germany). Where relevant, the practical focus should be on location of primary schools rather than secondary schools (as older children can travel to school themselves). New infrastructure developments may significantly affect commuter times, changing the attractiveness of locations. These projects are typically known in advance. Socio-economic data (eg. from national census) may help to identify residential locations of comparable households (eg. national professionals such as lawyers, accountants, engineers, teachers, senior civil servants; expatriates such as middle managers of multinational companies). Further residential areas mentioned by the real estate agencies during the survey fieldwork as becoming more popular or less popular among the reference population are noted in the report and monitored in subsequent surveys. A new district is then included, or those no longer pertinent are dropped from the survey, once there is a consensus between the views of estate agencies and rent surveyors and Eurostat/ISRP. 5. History of dwelling types The methodology defines 5 dwelling categories as follows: 1 bed flat 2 bed flat 3+ bed flat Joined house Detached house m m m m m m m m m m m m m 2-3 -

5 Within each category, there are different standardised sizes. All these size variants are priced in Brussels; only the most representative size variant within each category is priced in the other duty stations. With effect from the calculation of the July 2013 correction coefficients, price data for all dwelling categories is collected in all Intra-EU duty stations. Prior to that date, price data for houses was not fully included for London, Paris, Madrid, The Hague, Rome, Athens and 2012 were transitional years, adding non-detached houses and then detached houses. 6. Source of updating indices All rent data used in the calculation is updated to the current year by using the most appropriate price indices. Such indices shall reflect the common practice of specific indices used in a lease contract for updating rents. In most countries, the national Consumer Price Indices (CPI) are collected to update the data from previous years; however, for certain countries, specific index series, such as the Indice Santé for Belgium and the Indice de référence des loyers for France are used to update the rent prices from previous years surveys. For Germany, the updating indices are calculated from the weighted average of HICP COICOP Actual rentals for housing and COICOP Water supply and miscellaneous services relating to the dwelling. These indices are collected annually by the ISRP from the official NSI websites or directly received from the NSI. The index series currently used are listed in appendix Survey results The EARS data and reports are reviewed in detail and are used by OECD and Eurostat to establish average rent values according to the six year model, which are combined with the dwelling type weights from the most recent staff housing surveys to calculate rent parities by reference to Brussels. These rent parities are an important component of the calculation of the overall PPPs for staff, and by extension for pensioners. The results for each annual exercise are summarised in a brochure produced by OECD/Eurostat. The 2015 brochure is included as appendix 5. Eurostat is preparing a web page to briefly describe the work done on EARS, and this will include a time series of the brochures. 8. Conclusion Delegates are invited to take note of the information presented in this document

6 Appendices - 5 -