The kindest thing I can say about the REIA's Victorian price data is that it's wrong

The Real Estate Institute of Australia says the price data in its latest Market Facts report “inspires confidence”, with the weighted average capital city median rising 5.7% quarterly and 13.1% annually.

But for me it inspires suspicion and distrust. The kindest thing I can say is that the figures are wrong.

They’re grossly distorted and inaccurate because the figures coming out of Victoria – yet again – are wrong. I would like to use stronger language but I’ll settle for “wrong”.

According to Market Facts, the median house price for Melbourne rose 21.9% last year. If that was true, Melbourne had the mother of all booms last year.

But it did not. The Melbourne market rose about 8% in 2013. RP Data records a rise of 8.5%, Australian Property Monitors says 8.6% and the Australian Bureau of Statistics reports 7.9%.

So how does the Real Estate Institute come up with a growth figure for Melbourne almost three times higher than everyone else?

It’s also time someone launched an investigation into the price statistics coming out of Victoria.

Let’s call it creative accounting. According to this report the median house price across Melbourne is now $643,000. The 21.9% annual increase is based on the claim that the median price 12 months earlier was $527,000.

But previous editions of Market Facts have claimed that the median price in December 2012 was $550,000, not $527,000. Why has this figure suddenly been adjusted downwards, thereby allowing the appearance of a 21.9% annual rise? If the $550,000 previously published was correct, the annual rise is a far more reasonable 14.5% - thought still much higher than all other research sources.

The problem is that this happens every time Market Facts is published. In the previous edition, for the September 2013 quarter, Melbourne was credited with a 15% annual rise in its median house price, which at the time was double the rise recorded by all other research sources.

That was based on the claim that the median price is September 2012 was $513,000. But previous editions of Market Facts recorded the September 2012 median as $530,000. If that figure was correct, then the true annual rise in September 2013 was 10%, not 15%.

Market Facts claimed that Melbourne’s median rose 7.3% in the September quarter, because the median was $550,000 in June and $590,000 in September. But the previous report said the June median was $569,000 – and, based on that figure, the quarterly rise was 3.56%, less than half of 7.3% claimed by the Real Estate Institute.

What does this say about the overall findings of the latest edition of Market Facts? It casts doubt on the claim that capital city markets rose an average 13.1% last year. That figure is hugely distorted by Melbourne’s alleged 21.9%. If we ignore that rubbery figure, the only city that rose anywhere near 13% was Sydney with 15.1%. The next best was Perth at 7% and then Brisbane at 5.7%.

It means the bullish press release put out by the REIA is based on dodgy data.

I think it’s time this report was renamed Market Fiction. It’s also time someone launched an investigation into the price statistics coming out of Victoria.