The ins and outs of indices

With the other major index providers now releasing their September quarter data, we can start to see a firm pattern of recovery emerging in Australia’s housing markets.  The ABS released their stratified median series on the 6th of November showing a 0.3% rise in capital city house values over the September quarter, following a 0.6% increase in prices over the June quarter.   Similarly, APM showed a flat September quarter (0.0%) after reporting a 0.4% rise over the June quarter.  Closer to home, the RP Data-Rismark results showed house values were actually down over the June quarter by -1.4% and up 2.2% over the September quarter.

The flow of data brings to mind how, a few months ago, there was some commotion from a particular housing market commentator who presented a strongly worded case that the RP Data-Rismark Indices were unreliable and inaccurate.   It turns out, that was much kafuffle about nothing.

Being the earliest reporter on housing market conditions (the RP Data-Rismark series are published one day in arrears, unlike the ABS which took 37 days to publish their September results), it is easy to become a target when reporting on a change in market conditions.

At the time, of course, we vigorously defended our methodologies, pointed to our on-line white papers, highlighted the due diligence and independent auditing of our data and infrastructure and the peer review of the index construction.   We went into detail about our rate of data collection and attribute coverage.  We even put out an update on this blog addressing some of the misperceptions.

An extract of the assertions from one of the media articles is below (taken from Australian Broker online).

Moving on… its worthwhile re-visiting the differences between the RP Data-Rismark Home value measures compared with the ABS.  We have had some questions on why companies would purchase a subscription to our indices when the free ABS index reports a similar result without cost.

The graph below shows the two measure move virtually in synch over time with some smaller differences over shorter time frames.

 

Without going into a lot of detail on the differences in methodology (we have documented the benefits of a hedonic measure over a stratified median in the past on this blog), some of the key points to highlight are:

  • The RP Data-Rismark measure is much timelier, being published just one day in arrears.  For those who need timely data to factor into their decision making, strategies and market communications, no other index is this early to market.
  • The RP Data-Rismark measure is much more specific to housing types, reporting on the performance of houses, units and combined ‘dwellings’.  The different product types show quite different trends and performances.
  • Granularity – the RP Data-Rismark indices are available across smaller geographical boundaries.  We publish the headline results at the capital city and combined capitals level, however the index is also calculated across statistical divisions and statistical subdivisions nationally.  The methodology can also be applied to customised boundaries where required.
  • Length of time series – the RP Data-Rismark hedonic measure extends back to 1995 for most capital cities.  Other indices within the RP Data-Rismark suite of index products (we produce everything from simple median prices and stratified medians, through to repeat sales indices) show an even longer time series.
  • Measures by price point – The index can also be reported across broad price segments; the RP Data-Rismark stratified hedonic index measures value changes across the most expensive, most affordable and middle priced capital city suburbs.
  • Authority and credibility – the RP Data-Rismark index is without doubt the most heavily relied upon index throughout the Government, banking, finance and economic sectors.
  • Transparency – the RP Data-Rismark Index methodology has been independently audited, as has the data collection and infrastructure the index is runs upon.  White papers on the index construction are available here.
  • Portfolio tracking – the index was designed specifically to track the risk and return profile of a diversified property portfolio and enable financial markets to use the index as benchmark for trading.  You can view the daily index movements at the Australian Securities Exchange and also at the RP Data web site as well as on Bloomberg and Reuters services.

For a complete overview on the RP Data-Rismark Home Value Index, I can recommend you have a look at this blog we provided a few months ago.

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

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