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Paper 1 · Lesson 9 — Real Estate Economics and Valuation

Price indices

Property price indices: the base period, why a reading is meaningful only against its base, and why differently-based series cannot be read across.

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Question 1

The two walk-up blocks have four storeys and no lift; the other two blocks are twelve storeys and lift-served. A buyer asks how floor level bears on price in each.

Which statement is correct?

  1. A. In both cases a higher floor commands a higher price, height being desirable throughout.
  2. B. In the walk-up blocks a higher floor commands less; in the lift-served blocks it commands more.
  3. C. In the walk-up blocks a higher floor commands a higher price; in the lift-served blocks the relationship is reversed.
  4. D. Floor level bears on price only in commercial property.
Show the answer and full explanation

Answer: B

The rule. In a walk-up without a lift, a higher floor commands a lower price. In a lift-served block the ordinary relationship holds and a higher floor commands more.

Why B is correct. The development contains both configurations, and the relationship runs in opposite directions in each.

The other options.

  • A applies the general rule throughout.
  • C inverts both.
  • D confines the effect to commercial property.

Exam note. The presence of a lift is the switch. The same development can contain blocks where height helps and blocks where it hurts.

In a walk-up without a lift, a higher floor commands a lower price →

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