Why Are Melbourne Median Prices Different Between Data Providers?

The REIV have released their June quarterly statistics, which show a seasonally adjusted 2.4 per cent rise in the median house price.

This takes Melbourne’s median house price from a revised $549,000 in the March quarter to $562,000 for the June quarter. The median unit price also showed a similar increase. It went up 2.8 per cent (seasonally adjusted) to $464,500.

As is generally the case when statistics are released, much debate circulates as to how the information differs from other data providers.

For example, the REIV recorded a seasonally adjusted 8.4 per cent rise to the median from this time last year.  The ABS show an increase of just 1.1% (to March 2013), APM show a 3.6% increase (to March 2013) and RP Data 3.3% (to June 2013.)

It should be noted, unlike the other indexes, that the REIV do not stratify their median figures to reflect different aspects of each housing type outside of the broad description of ‘units’ and ‘houses’.

In REIV terms, a unit could be a small villa on a subdivided block of typically six to eight free standing or attached dwellings, a one or two bedroom apartment in a low rise or high rise block, a high spec townhouse on a ‘side by side’ subdivision, or a bedsit. Obviously, this can create distortions when assessing the figures.

The same is the case for housing. Median house prices cover detached dwellings, terraces, a semi-detached ‘one of a pair,’ duplexes, warehouse conversions and holiday homes. 

In addition, the REIV now adjust their data to allow for seasonal distortions, which is producing some rather large differences between the original figures and the seasonal changes. Confusion abounds as to how the data is adjusted as there is scant detail on the REIV website to give a detailed explanation.

The REIV quarterly unadjusted figure sits at +7.2 per cent, whereas the seasonally adjusted figure (mentioned above) is +2.4 per cent.

As a general rule, seasonal adjustments are calculated by looking at the average seasonal shift during the same quarter over a lengthy time scale. The information is then used to assess the amount to either add, or subtract, from the raw data. While this can be useful from a trend perspective, in real terms, most property buyers are battling a rather heated auction terrain in the inner and middle ring suburbs with clearance rates exceeding 70 per cent most weeks.

Because the REIV don’t stratify their results, we also see big differences in individual suburb changes. For example, Hawthorn’s unit median has increased 20 per cent from the last quarter. However, there should be no confusion here – individual unit prices in Hawthorn have not increased 20 per cent. This is median data, and without stratified statistics, the median price can be easily boosted with different property types being lumped under the ‘unit’ banner, therefore allowing for better unit sales to boost the raw results.

From an anecdotal perspective, property prices have generally increased. For example, a unit that I would assess from an expert analysis of recent comparable data to be worth anything in the region of $420,000 to $440,000, can often end up selling 3 -5 per cent higher with competition. And in a suburb where auction sales predominate, this can have quite a dramatic impact on both vendor expectation (as neighbours see boosted results) and buyer physiology, as property shoppers realise they need to up the budget to exceed the somewhat heated atmosphere.

As we approach the federal election, key issues are coming to the fore, and housing has not been left out.  In a recent News Corp article, ‘housing affordability’ came streets ahead of other hot topics such as ‘education’ or ‘border control’ – accompanied with case studies where 50 per cent or more of family income is going towards mortgage or rental payments alone. 

The debate follows the ABS housing finance commitments data for May 2013, in which it was noted that first home buyers are playing a decreasing role in the purchase of property long-term. Movements in percentages are only fluctuating on the back of various grants and incentives.

Currently, first home buyers account for 14.6 per cent of Australia’s buying market. Year on year this is down -10.6 per cent.

In contrast, the number of owner-occupier housing commitments is up 15.1 per cent year-on-year, but it’s investors who are making a far bigger contribution to price rises in Australia’s real estate market. As it stands, compared to last year, all states are experiencing an investor-led boom.

Victoria’s numbers are up 11.3 per cent, Queensland 4.3 per cent, South Australia 8.3 per cent, Tasmania a more modest 1.5 per cent, ACT 11.1 per cent and the Northern Territory 28.5 per cent. Outright winner Sydney is up 35 per cent.