There has been quite a debate going on amongst providers of property data over the past week or so regarding the reliability of one key property index. Read on for both sides of the story.
RP Data-Rismark has hit back at criticisms over the accuracy of its Home Value Index June data.
This week, SQM released a statement questioning RP Data-Rismark’s methodology, particularly the data showing a 1% increase in value of Melbourne properties.
SQM’s managing director Louis Christopher questioned RP Data’s monthly report for June, which claimed capital city house vales had risen 1%.
“Their daily hedonic index, for which these claims are based on, is an unreliable index as it is based on a miniscule proportion of actual sales that happen on a daily basis. Effectively on a day to day basis, the index misses out on over 95% of sales. And since it is an unrevised index, it means those missing sales are never taken into account,” he said.
“I do not believe for a moment that house prices are now rising in Sydney or Melbourne as RP Data Rismark has claimed.”
While he admitted the monthly results are widely used in the industry, he warned the alleged ‘inaccurate’ data was damaging for policy-making.
“We are also aware that the RBA and other industry players do look at this daily index closely. So in other words, this daily index potentially can have an influence on interest rate policy setting,” he said.
RP Data-Rismark’s research director Tim Lawless and CEO Ben Silbeck were quick to discount the allegations.
“This claim is wrong. Markets do not follow a straight point to point trajectory in any direction. They do, however, demonstrate natural volatility and seasonality as they traverse their path," Silbeck said.
"Prior to the daily RP Data-Rismark index, these daily market movements were not observable in the Australian residential property market,” he said.
“A movement of 1% or 2% over the course of a month is negligible when compared with the movement in the stock market over a similar period. For example, even in a market which is declining it is possible to find periods where it is possible to have traded in and out at a profit.”
RP Data-Rismark reiterated the importance of its data for key industry bodies.
“We would presume these groups use our measure of housing market conditions because they are the timeliest and most accurate measures available,” he said.
For more information on RP-Rismak's data's defense of its Home Value Index, visit the RP Data blog post on the subject here.
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