The Australian Bureau of Statistics (ABS) released its house price data last week causing newspaper headlines such as “House Prices Rocket 20%”. The ABS March Quarter House Price Index showed that the capital city average house price had increased by 20%.

Compass Capital Property Group has provided the following table which shows the growth in house prices over the past four quarters estimated by four separate sources.

(APM is Australian Property Monitors)

The smh.com.au article, with the headline referred to above, quotes a Macquarie Bank strategist who says that ”The Reserve Bank places more weight on the RP Data index.” BT economist Chris Caton is also quoted saying that “the ABS measure is not the [Reserve] bank’s favourite”.

Unfortunately, the ABS measure is the Sydney Morning Herald headline writer’s favourite.

Compass Capital Property Group believes that the main problem with the ABS measure is that it relies too much on the median price which was affected in the period by first home owner incentives. In our view, in a period in which there have been unusual levels of activity by first home owners, the median approaches are likely to have a bias, and the approaches of RP Data Rismark (hedonic index) or Residex (repeat sales) are likely to be more accurate.”

Link to Compass Capital Property Group

Practice Intelligence Australia – 2009 Archive (member access)