I keep a lot of real estate information, especially about real estate prices. This is a not so old article that tells a very common story. It is sad but true.
At a recent seminar when Australia’s price data mess was talked about many in the audience were incredulous. Some had believed that if a national newspaper told them Sydney prices had risen 10 percent, based on figures from a well-known research entity, then that was a fact to be relied upon. If a research report portrayed a 10 percent decline in Darwin apartment prices that was information you could take to the bank.
The reality is different. With scary regularity, figures about prices from one source are commonly contradicted by data from others. The problem is, no one in Australian media seems to have noticed. If journalists are aware, they’ve decided to ignore that reality because it makes life complicated.
So this week media dined out on the latest price figures from Core Logic. Here’s a sampling of the headlines:-
Sydney house prices cement return to double-digit growth (AFR)
Sydney, Melbourne, Canberra house prices galloping ahead (New Daily)
Strong early spring for Melbourne home prices as values rise again (Herald Sun)
There were many other similar ones. Those headlines and the articles that followed showed a blind acceptance of the figures from that one source as absolute fact. But they’re nothing of the sort. They’re just one version of the truth, which can change dramatically depending on who you’re listening to.
Sydney house prices were stated by CoreLogic to have risen 10.9 percent in the past year. But the latest figures from Domain claim that annual house price growth in Sydney is just 2.1 percent. Meanwhile, SQM Research reports annual growth of 1.7 percent and Residex says 2.1 percent.
There are similar discrepancies with the figures for the Sydney apartment market. CoreLogic reports an annual rise of 9.1 percent, while SQM says 4.0 percent, Residex 4.2 percent and Domain just 0.9 percent. The most recent Property Price Indexes from the ABS reported a rise of 3.6 percent for Sydney.
Those are big differences. One source claims Sydney is still booming while others portray an end to the boom. But the differences are even more startling in other cities.
CoreLogic reports a 10.2 percent annual rise for Darwin’s apartment market, but Residex records a 10.9 percent decline. One portrays a boom and the other a disaster. They can’t both be right – and there’s a strong possibility they’re both wrong. Domain records a 4 percent rise and SQM a 2.7 percent fall.
SQM says Hobart’s apartment market is up a rather spectacular 21.7 percent, but Domain reports an 11.7 percent decline. One claims a nation-leading runaway boom and the other a catastrophic decline.
What are we to believe?
CoreLogic reports a rise of 6.3 percent for apartment prices as the average situation across the eight capital cities. Economists interpret this as “Australian apartment prices are up 6.3 percent” while myopic ratings agencies like Standard & Poor’s see it (taken in conjunction with the high levels of new supply) as evidence that a “sharp correction” in prices is looming.
But are “Australian apartment prices” really up 6.3 percent? SQM records an overall position of a 0.1 percent decline for that same market, while Domain reports a rise of just 1.2 percent and Residex says the market overall is up 3.9 percent.
Similarly, what are we meant to believe about Sydney’s median house price? The price of the mid-range Sydney house is $920,000, $1,068,000 or $1,165,000, depending on which researcher you believe. There’s a difference of $245,000 between the highest and the lowest.
The greatest problem is the way media reports each set of figures. Each is re-cycled to the public as fact. No one highlights the reality that they’re statistics from a single source and that other sources are delivering different results.
It’s a serious situation
Consumers base big investment decisions on these figures. They shouldn’t, but they do.
I’ve heard investors talking about their intention to dive into the Sydney market because they read somewhere that prices are still rising at a double-digit rate. They missed the previous week’s article which said prices were rising only 2 percent.
We’re at a point where consumers can believe almost nothing that they read on real estate prices.
It is important to tread with caution. If you view real estate as a long term investment, which you should, a lot of this type of short term information is not important in deciding to purchase.