Getting an accurate picture of housing prices

The Weekend Herald very sensibly provided an insight into the variety of sources of property data available on the market today – the piece titled “getting an accurate picture of housing prices is difficult, despite all the data” contained an anlysis by the Economic Editor describing the many house price reports as likened to a strobe light in a nightclub – not providing a steady illumination.

I think that contary to the opinion of the Herald, whilst there certainly are a large number of reports – a clear picture can be attained of the property market once some clarity is brought to the timing of the collection of the data as opposed to source or accuracy.

The NZ Herald identifed 8 issuers of data on property data: QV / REINZ / Barfoot & Thompson / Harcourts / Realestate.co.nz / Sheldons / Statistics NZ / First National.

Before assessing any of the reports it is important to look at the house sale process as to clarify when each report is produced based on what data. There are 3 milestones in the timeline of a property sale which speak to the presentation of data.

Listing – when any property is listed the agent in consultation with the seller decides a price at which the property will be marketed. As is well understood this price is primarily a guide, as every property is unique and the final sale price will be set by the buyer and seller thrrough negotiation.

Contract negotiation – once the buyer and seller have come to an agreement (through auction, tender or offer) the purchase will reach an unconditional stage where there is legal agreement for the transaction to occur at a future date (not determined – could be as short as a couple of weeks or many months)

Registering the sale – once the legal transfer has occured and the new owners take possession, the details of the sale are registered with the local and national government authorities.

Now all of the organisations highlighted above and in the Herald article report their data based on one of these 3 points in time. Lets look at an example of a single house to see where and how each organisation will report the data.

Lets say for example that a house is listed in the middle of this month – 15th July in Auckland.

It will be marketed for a 4 week period by a licensed real estate agent with a tender deadline on the 20th August. The facts concerning this property will appear as part of the data represented by one or more of these organisations over the coming months.

• The first appearance will be on the 1st August when Realestate.co.nz produces its monthly NZ Property Report. This report aggregates the listings of 94% of all licensed real estate agents which listed properties in the month (in this case July). The report measures the number of new listing / the average asking price – nationally and regionally, as well as the relative inventory of properties for sale.
• The tender process closes on the 20th August and the chosen tender is acceptable to the seller, however let’s say it is a conditional offer for sale subject to finance and a building report. The deadline for these to be completed is the 7th September.
• On the 7th September the property sale becomes unconditional and the process moves to settlement which has been agreed as part of the offer as the  5th October. This is the date on which the new owners take possession.
• Now we reach the second occurance of the reporting of the data from this property. In the 1st or 2nd week of October the sale details will be presented by the REINZ as one of the properties that was recorded as unconditional in September (7th of Sep). REINZ only report unconditonal sales.
• At the same time (early October) the real estate companies (Harcourts, Barfoot & Thompson, First National) report their unconditional sales for month of September – despite their own terminology (booked sales, contracts) these are all referring to unconditional sale contract. The reason for this is that at this point in time the licensed agent has completed their contracted role and can recieve payment of commission.
• All of these reports from Harcourts, Barfoot & Thompson, First National and REINZ provide a picture of the number of sales and the average price – the difference is that of course REINZ has 100% of all licensed agents reporting.
  Harcourts represents 180 offices around the country and Barfoot & Thompson report  the sales from 61 offices across the Auckland region. First National have around 70 offices nationally. All the data in each of these reports are facts – the number of sales and the average price. REINZ reports median price which is a statistically more robust number but is still a function of the same facts.
• Now as yet QV has not reported this property sale. The reason for this is that their data is based on the registered change of ownership and title. This process will start after completion date which in this case is 5th October. The lawyer for the new owners will file title changes and these will be picked up by QV in October. QV will then include this transaction in their price report in November as they use 3 month moving average as opposed to a single month of data.

This then provides a clearer view of the fact that a property listed in July will contribute to the reporting from across these companies spanning 4 months presenting the facts of (i) the asking price and (ii) the sale price.

The fact is that these numbers are the same unique facts of that property’s sale process – however as a function of the fact that property transactions in general are often protracted and never follow the same time line this will always result in differing statistics produced by different companies.

It does not mean that anyone source of data is anymore reliable or less reliable!