Methodology and method for price-level forecasting in the building industry

This paper discusses the appropriate methodology for establishing a model for forecasting building price movements and interpreting building value statistics. The proposed methodology is illustrated with an ordinary least squares (OLS) multiple regression model quantifying the effects on the price level of variations in the degree of competitiveness in the industry. The dependent variable is a Market Conditions Index and the predictor variables are Building Approvals, Fixed Capital Formation in Building and the Rate of Unemployment. This model overcomes one of the most serious shortcomings of previous models in that it incorporates into the model adjustments to the capacity of the industry in response to variations in demand with the consequential improvement in accuracy.