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The data for the calculation is obtained via the property trading website dom.ria.ua
To calculate Ternopil HPI (the Black line), we total the asking prices of around 200 flats and divide them by the total area of the flats. As a result we get average price in USD per square meter of total flat area. For example, if total price of all the flats is $9,000,000.00 and the total area of all the flats is 11,250 square meters, than if we 9,000,000 / 11,250 we get $800.00 per square meter.
To calculate inflation adjusted Ternopil HPI (the Red line), we take USD inflation month on month (MoM) data and subtract (or add if the inflation is negative) the percentage from the price (Black line) and then we. For example, if our price for the last month was $800.00 and the inflation for the same month was 0.1%, then 0.1% from $800.00 is $0.80, then the inflation adjusted HPI is $800.00 - $0.80 = $799.20 per square meter.
Because the inflation adjustment is time dependant, the Red line shows the property value move from when we started our HPI (i.e. from July 2009).
The goal of the Green line is to show how the HPI would move if it were moving together with the Consumer Price Index in Ukraine (Ukraine CPI). Ukraine CPI is measured in Ukrainian currency (Hryvna). We, however, need to show the price not in Hryvna, but in USD. Therefore, in order to be able to calculate the values on the Green line correctly, we need to take into account change in the exchange rate between Hryvna and USD. This means that we need to have three data: HPI, Hryvna Inflation (Ukraine CPI) and the change in exchange rate of Hryvna / USD (not the rate itself but the change in the rate for that month which we need to calculate by comparing the exchange rate in the beginning and in the end of the month).
For example, if:
HPI = $800.00;
Ukraine CPI = 0.3%;
change in Hryvna / USD exchange rate = 2.00 Ukr Hryvna
We first find 0.3% out of $800.00 that is $2.40 and then add it to $800.00, that is $802.40. Now, if the change in the exchange rate is the same (0) then $802.40 is our value on the Green line.
If, however, the change in the exchange rate between Hryvna and USD for that month changed from 8.00 Hryvna / USD to 10.00 Hryvna / USD, then we first need to calculate Ukraine CPI in USD. That is: (8.00 - 10.00) / 8 * 100 = -25%. We then -25% + 0.3% (Ukraine CPI) = -24.7% (Ukraine CPI in USD). When we have this data, we then take 24.7% our of $800.00 and subtract if from $800.00, that is: $800.00 * 24.7 / 100 = $197.60. Then $800 - 197.60 = $602.40 - is the value that would be on our Green line for that month.
To calculate the current price in International Dollars, we need to use Purchasing Power Parity factor for Ukraine = ~0.32 (on 01/01/2014).
If we did the prices in Hryvnia, we would use formula: (price in Hryvnia) / (Hryvnia/US Dollar rate) * 3.1 .
For example, if in 2015 the average salary in Ternopil region in Galizien was 3000.00 Hryvnia, then 3000 / 23 * 3.1 = ~404 International Dollars.
However, because we do prices in US Dollars, we need to divide price in US Dollars by the Purchasing Power Parity factor for Ukraine, that is 3.1 (or multiply it by 0.32).
This means that 0.32 US Dollars in Ukraine will buy you the same as 1.00 US Dollar will buy you in USA.