Short-term median price data can be interesting, but more often it's confusing or misleading

One of the greatest sources of property misinformation comes when newspapers report short-term price data from a single source. 

Tremendous importance is placed on monthly median price changes in figures from one research company and sometimes even weekly price movements. 

The reality is that monthly changes are often irrelevant and it’s quite farcical to place any significance on alleged weekly movements.

Undue emphasis on monthly data from one source caused some media to declare in October that the market had peaked and the boom was likely over. More recently, figures for the December quarter from multiple sources have made nonsense of that interpretation. 

But writers and commentators continue to repeat this kind of mistake because (a) they don’t understand real estate data, and (b) they don’t care too much because it’s easy copy and a cheap headline. 

The record shows that statistics from one source can be contradicted by figures from another. When media reports both in isolation the result is confusion and misinformation. 

As one example, Australian Property Monitors says the median unit price for Darwin rose 8% last year, while RP Data says it fell 4%. One week the headline shouts that the market is booming and the following week the same newspaper says the market’s in decline. 

Having said all that, we had a rare event last week when house price figures published by APM were almost totally in line with data published earlier by RP Data. I can’t remember the last time that happened, given the variances that usually arise from different methodologies and competencies.

This time around, both sources found that the average rise in house prices across the eight capital cities was slightly under 10% in 2013.

One said Sydney rose 15.2% and the other said 15.1%. Both recorded a 5%-ish annual rise in Brisbane and both agreed Adelaide’s market had nudged ahead about 3% last year.

RP Data said Melbourne rose 8.5% and APM said 8.6%. Have they been comparing notes? If so, they didn’t consult the REIV, because that august source of “interesting” figures has claimed a rise almost double that of the two independent research sources.

Darwin’s figures were a little wider apart, with one suggesting a 5% rise and the other a 7% lift. In Perth, RP Data’s 10% increase compares with APM’s 8.5% rise. Both sources claimed moderate rises in Hobart, one suggesting 3% and other 5%.

So, according to those two sources, all eight capital cities lifted their house prices last year, mostly by moderate amounts, with the exception of Sydney which had its first strong year in a decade.

There’s less uniformity in the data on apartments, but there are some areas of near agreement. The average across the capital cities, according to APM, was a rise of 8% while RP Data said 9%. Both reckon Sydney’s market lifted about 11% and they agree that Canberra rose around 1% and Adelaide by less than 1%.  

Melbourne had a solid year with both sources, but one records a rise of 7% and the other 9%. Ditto Perth, with a rise of 6% or 9%.

Hobart fell markedly, but the degree of decline varies from 5% with RP Data to 8% with APM.

As previously mentioned, Darwin’s situation is a mystery, given that one source reports a solid rise and the other a significant decline.

The bottom line is that while this kind of data can be interesting and occasionally informative, it is more often confusing and/or misleading. And it records the recent past, which really does very little to inform the future, which is the key piece of intelligence for property investors.

As I have written before, it’s far more useful to know what’s happening with the number of sales, rather than the median prices they produce.

Terry Ryder is the founder of hotspotting.com.au.

You can contact Terry via email or on Twitter.