The ECB’s strategic review (2020-2021) came out in favour of including owner-occupied housing costs in the way inflation is measured. Surveys that the ECB and the euro area central banks held with the general public revealed that there is considerable concern about rising costs for housing, when it comes to the concept of “inflation”. Yet, such things as house purchase costs are not yet included in the current inflation measure that the ECB uses, namely the Harmonised Index of Consumer Prices (HICP). 

Eurostat already publishes an index, in which house purchase costs, as well as other expenses such as stamp duty and renovation work, are included. This is the owner-occupied house price index. The ECB is calling for this index to be gradually integrated, in stages, into the existing HICP index. This article looks into just what exactly this index reflects, how housing costs will be included, and what impact would that have on the measurement of inflation. The focus is on findings for Belgium. 

The impact is quite significant in the most recent period. In 2020, Belgium’s inflation rate, including the cost of owner-occupied housing, would for example have been 0.7 % instead of the official figure of 0.4 %, an impact of 0.3 of a percentage point. Based on the first three quarters of 2021, the impact would even be 0.4 of a percentage point in that year.