Property price statistics are often rubbery figures: Terry Ryder

Australia is a nation full of highly confused real estate consumers. They’re befuddled because there is so much conflicting data on matters relating to residential property, especially on prices.

The confusion arises because of the widespread acceptance of anything labeled “research” as fact. Media these days is driven by under-resourced journalists and there’s a growing tendency to recycle press releases as articles, without the scrutiny that once was common in the industry.

Back in the day, publishing a press release (which, by definition, is someone’s propaganda) verbatim was a sacking offence. These days it’s mainstream journalism, especially in real estate. Most of the online “news” services that send out daily bulletins consist almost entirely of contributed material. The journalistic content is close to zero. 

Any press release from a name research company featuring price data will be published without question. If the press release says Sydney prices are still soaring, that will be the headline in multiple media outlets, including some of our biggest newspapers.

The problem is that price statistics are often very rubbery figures. One of the ways we know this is by comparing price data from multiple sources. The differences and contradictions are quite stark. 

Recently I wrote a report which focused on the latest price data for the eight capital cities from four different research sources. The areas where they disagreed were far more numerous than the ones where they were broadly in concert.

Two sources claimed Sydney prices were still growing at an annual rate around 11 percent, while the other two said the annual growth rate was down to 1.2 percent and 2.6 percent.

One source said Darwin house prices were unchanged while another recorded an 8 percent decline. Two sources said Canberra apartment prices were rising and the other two reported they were falling. All four agreed that Darwin apartment prices were falling but the rate of decline ranged from 0.2 percent to almost 10 percent.

Annual price growth for Melbourne houses ranged from 7 percent to 15 percent. One said the capital city average was 2.7 percent annual growth in house prices while another claimed it was 8.2 percent.

There are myriad other examples.

We know that different research companies have different methodologies and parameters, but consumers are entitled to think that the movement of prices in a particular location is a mater of fact: when media reports one week that they’re rising and the next that they’re falling, confusion is understandable.

It seems no one in media has noticed the discrepancies.

And now we have the Reserve Bank revealing that it disregarded price data from one of its regular sources. Apparently a change in methodology resulted in the research entity overstating price growth in Sydney and Melbourne.

At the time those figures were published, I challenged them because I thought they were clearly wrong. They contradicted known trends in the market and also conflicted with data from other more credible sources. 

But media outlets across the nation published those erroneous figures as fact. There were numerous headlines declaring the fading Sydney boom had been reactivated somehow, miraculously, in contradiction of all previous data.

Inevitably this was accompanied by observers shouting about bubbles, affordability crises and young Australians priced out of the market, doomed to a lifetime of renting.

Worse, one of the big-name global ratings agencies rushed out a warning about the re-inflation of the Australian house price bubble, based purely on a single month’s price figures from one research source. It says something about the credibility of the ratings organisation that the basis for them issuing international press statements was so flimsy.

The message for real estate consumers is to take real estate statistics with several grains of salt. It’s alarming how many people base investment decisions on published data from a single source, reported verbatim by an unquestioning media.

Terry Ryder is the founder of hotspotting.com.au. You can email him or follow him on Twitter.