Investors struggle through the stats for price direction across Australia
Putting your faith in published data on prices is one of the great perils facing property investors around Australia.
Anyone who bases a major investment decision on something they read about the pricing levels in a particular location and how much they are growing (or falling) may end up with a serious miscalculation.
It’s possible to access three sources for price information on a particular location and get three different results – one suggesting prices are rising, another claiming they’re stagnating and a third declaring that values are falling.
Here’s an example: a couple of days ago, I was writing a report and did a Google search on the median house price for Alice Springs in the Northern Territory.
The search engine brought up results from multiple sources.
Here are three of those outcomes:
- According to Your Investment Property magazine, quoting CoreLogic data, the median house price was $299,950, up 5.7% in the past 12 months.
- According to realestateinvestar.com.au, the median house price for Alice Springs was $469,000, unchanged from a year earlier; and
- According to homesales.com.au, the median house price for Alice Springs was $1,109,913, down 1.7% on a year earlier.
So the median price was either $300,000 or $469,000 or $1.1 million, depending on which source you chose to believe. And prices in Alice Springs were either down a little, unchanged or up moderately, depending on your source.
If this was an isolated example, there wouldn’t be a problem. But the experience of finding contradictory information on pricing is common.
For the January edition of my monthly newsletter The Ryder Report, I compared price growth for apartments in the major cities, taking figures from three major sources.
Firstly, the figures demonstrate (yet again) that we don’t have a single property market in this country. We have many different markets, which currently are delivering contrasting results. And secondly, there are big differences in growth rates from one source to the next.
Hobart is the clear market leader: all three sources have the Tasmanian capital leading on annual growth in the median apartment price, but there are big variations in the claimed rate of growth, ranging from 9% to 18%.
Melbourne ranks second with two sources, but again there is quite a divergence in terms of the published annual growth rate in median prices. The ABS has apartment prices in Melbourne up 4% but CoreLogic has double the growth rate (a little over 8%) while SQM’s growth rate (13%) is three times higher than the ABS rate.
There is broad agreement that the Brisbane unit market is rather mediocre, but SQM record no change in prices, while ABS has prices down a little while CoreLogic has prices declining, but at three times the ABS rate of decrease.
It’s hard to know from these figures where the Canberra market is at: the three growth figures are 1.8%, 2.1% and 10%. Two sources suggest a quiet market while the third depict a strong rising market.
Unit prices in Adelaide? CoreLogic suggests little change, SQM suggests a 2% annual rise and the ABS has prices up 6%.
CoreLogic data suggests prices have stopped falling in Perth but both the ABS and SQM record an annual decline of about 6%.
So, what do we make of that? My conclusion is: it’s all dodgy data, to a certain degree.
All information about median prices and how much they’ve risen or fallen is rubbery figures to some extent, with the discrepancies and contradictions partly explained by different methodologies and varying definitions about various elements, such as how do you classify townhouses and where do the boundaries sit for a city like Melbourne.
But think about it. The Sydney metro area has over 700 suburbs and what’s happening in the Northern Beaches is somewhat different to the situation in Penrith, while Bondi has few similarities with Campbelltown.
Yet a research company will try to distil all the sales activity in the past 12 months down to a single growth figure, declaring that Sydney prices are growing … well, the rate of growth depends very much on the source.
Media treats them as fact, despite these kinds of discrepancies, which are common. And bases sweeping interpretations on individual figures from a single source.
Terry Ryder is the founder of hotspotting.com.au
twitter.com/hotspotting