One stat shows a market peak, but should we believe it?

Back in May some media outlets were telling us that the property boom was over.

After dwelling prices had recorded “the biggest rise in three years” in the March quarter (a 2.8% quarterly rise, as an average across the eight capital cities), data published in May was interpreted as the end of the alleged boom almost before it had started.

The limelight seekers at RP Data, who tend to sacrifice credibility at the altar of cheap publicity, had published (on May 1) their analysis of what happened to prices in April, apparently forgetting that it would take months before a full set of data was available to make an accurate call.

These (very) preliminary figures spat out of a careless computer found that prices fell 0.5% in April. This led multiple newspapers to declare the market recovery to be over.

It was, of course, a statistical aberration and prices, on average, continued to rise in subsequent months. The same media outlets were pretty soon shouting about “white hot” markets creating that most dreaded of property phenomena, the bubble.

That experience should have been a timely lesson that one month’s figures from one source are meaningless, particularly when there are numerous other research outlets with different figures.

But, no, we are back in the same territory again. The same rubbery figures factory reports price stagnation in November. Media, aided and abetted by RP Data mouthpieces, has declared the peak of the market.

Louis Christopher of SQM Research has disputed the validity of the figures. He says it’s wrong to claim that the market has peaked based on a single month’s figures. He’s right of course and anyone with any experience with real estate research would agree.

Privately, the boffins at RP Data would probably agree too. If they don’t, they need to find a new profession. But the objective is today’s headlines, not genuine analysis.

But hang on. If you dig down deeper in the dodgy data, prices allegedly rose 2.8% in November in Darwin, 1.2% in Adelaide and 2.9% in Perth. Sydney showed monthly growth of a tick under 1%, which, in annual terms, is still a strong growth rate.

Only Canberra and Melbourne showed significant falls.

So the basis for declaring the peak of this market cycle is flimsy indeed.

If you chose to place any credibility on these figures, which I don’t, you would interpret them as depicting markets still growing strongly in Sydney, Perth, Darwin and Adelaide.

So this so-called research fails on two major points. It treats Australia as one property market and declares that “dwelling values increased 0.1% in November”, ignoring regional differences, which show that most of our major markets are still rising strongly. And it places undue significance on a single month’s figure from a single data source.

And when you look at the figures from the same source for the three months to November, they actually show capital city homes values (again treated as one market) rising at their fastest pace in three years.

The end result of this shameless lust for publicity is misinformation and confusion for property consumers.