Rental Indicator Development Methodologies

The rental price index measures changes in average rents in the market based on the number of units and average rent for each property type, taking into account seasonal changes and cleaning data from outlier values.

Methodology

The rental indicator is calculated using the Laspeyres methodology, where the rental index is calculated by comparing current average prices with base period prices using the Fisher methodology, which combines the Laspeyres method (based on the number of rented units in the base period) and the Paasche method (based on the number of rented units for each period), to obtain an indicator that reflects real price changes in a balanced manner.

Indicator Calculation

The rental index is calculated by comparing average prices in the current period with base period prices (Q2 2022), using the Fisher Ideal Index methodology, which relies on combining two methods:

Laspeyres Price Index: Measures price changes using the number of rented units in the base period, reflecting how prices would have changed if quantities remained constant.
Paasche Price Index: Measures price changes using the number of rented units for each period, reflecting how prices changed based on actual current quantities for each period.
The two methods are combined using the geometric mean to obtain a more balanced indicator in representing market changes.

The indicator is calculated at multiple detailed levels to meet different analysis needs, including:

Asset type: Residential, Commercial
Measurement frequency: Annual, Quarterly
Geographic scope: Kingdom of Saudi Arabia, some cities in the Kingdom

Unit of Measurement:

Index, base period Q2 2022

Indicator Coverage Start

Q1 2019