The announcement today of the establishment of a Stratified House Price Index to be published by the Real Estate Institute in association with the Reserve Bank recognises the ever growing interest and importance of timely and accurate information on the property market.
The new index which will be presented monthly will take the existing monthly sales data of volumes and price and establish a tracking index which will more accurately present house price movements removing through using sample sets within suburbs the impact of changes in the mix of properties sold. This new index will continue to be the most timely set of data as it will use the sales data from the preceding month as represented by the reported sales by all licensed real estate agents.
This move reflects strongly the message I have been observing at the conference I am attending in the US this week. A key trend I have observed here through the sessions is the recognition by all in the US real estate market to the criticality of timely and accurate property information – not just price, but also all the key drivers of the property market.
One specific session identified 10 key drivers that when accurately reported and analysed could provide a very clear picture of the property market overall:
- Supply of property coming onto the market – quantity of new listing indicating confidence in the market to support sales by vendors
- Demand for property – an indicator of the level of interest and confidence in buying property
- Motivation of buyers and sellers – in the case of sellers, whether there is distress sales or mortgagee sales; in the case of buyers more around return on investment and interest rate costs of financing
- Sales price – the trends and absolute price level
- The asking price of new listings coming onto the market
- Sales performance – the ratio of sales to listings, in the US this is around 40% with up to 90% for mortgagee sales
- Sales volumes – the monthly tracking volumes
- Contract ratio – this is sales matched to total inventory
- Pending sales – this is more of a US ratio as sales process has pending homes sales which a proportion of which do not complete – close to conditional sales tracking in NZ
- Inventory of property on the market
In listening to this presentation and reviewing these 10 key drivers I was struck by the fact that in NZ if you were to go back just 1 year ago the only hard data from this list of 10 that was readily available was Sales Price and Sales Volumes.
Whilst we do not now have hard data on all 10 of them; as a function of the power of the data from this website as reported through the NZ Property Report and other statistics such as mortgagee listings we have added a further six key drivers on top of the original two.
The data will be worthless unless all RE Agencies provide their sales stats – and we are already seeing two major franchises no longer submitting all of their monthly sales data which is now distorting the overall monthly stats. Come November when membership of the REINZ is no longer a requirement, I predict many more agencies will stop submitting their sales as well. This is a major issue lurking beneath the water ready to bite…
Rob,
You are clearly privy to information which I am not. In my regular discussions with the REINZ (they one of our shareholders) I am not aware that any office or franchise has decided to stop submitting sales data.
From regular meetings I have attended I have seen, if anything a greater alignment to the unique and comprehensive merits of all offices continuing to submit data – the change of structure come November is unlikely in the short term to change any office’s view of the sales statistics.
The fact is that the sales statistics are a critical tool for all offices to be effective in developing marketing proposals and so any office would be shooting themselves in the foot to withdraw data as to do so would cut off their access to the total sales data.
Because agents don’t see private sales (5 – 10% of the market), the best solution here is that solicitors report each unconditional sale to a central House Price Index database/email address/website. Solicitors see every sale.
This would ensure “all sales” are used to calculate the new HPI, not just 90-95% of them. Garbage in, garbage out. Anyone else see the logic in this?
Alistair,
Unless I have missed it, in which case please point me to it, you still owe me that chart.
Personally I think a chart showing the distribution of sales prices for the whole market would give the greatest insight. Yes I know the mass media like an index to quote, but many would prefer transparency.
Your 10 key drivers are of course within the market. I would argue looking outside the market at what drives those factors would give greater insight.
Unemployment and interest rates are obvious examples.
Steve,
I agree to have a single database of 100% of the sales for statistical analysis is the ultimate – clearly QV focus on this however in comparison to the REINZ their data is less up to date due to the protracted timelines between Unnconditional and legal reporting.
The question though is, would any organisation give up the role of reporting the data as the REINZ does for its commercial / media gain for the betterment of the principle when 90% of the data is still good enough. In the same way as I would not give up the data I have with realestate.co.nz for it to be aggregated with other data to give 100% of the web stats when I can report for 93% of the data.
Steve,
I think you will find that in the post I wrote on the introduction of the truncated mean for the asking price metric on the NZ Property Report there is a graph showing the distribution of listings by asking price. I do not have a similar chart for sales.
To your second point – you are absolutely right and this is what is done or should be done by economists and financial journalists. I think the important thing is the access to the data – richer data and that was the point I was seeking to make. How much better the data is becoming to aid our comprehension of the drivers of the market. Making these available and accessible as I have done with the NZ Property Report I hope will assist these economists and financial journalists.
Hi Alistair,
I’d forgotten about that chart! Yes, that’s an excellent chart.
Note my request and your reply on that article
I’m not sure what would work best, but one idea I have is this. If you could create a chart for say every year going back quite a few years, they could then be used to make an animated gif. That way it would be possible to see the curve ‘flowing’ to the right as prices generally increase, but also see it ‘ebb’ when they drop back, or even more interesting, change shape if sales in one price range increase/decrease relatively.
What I would love to have is:
1. A spread sheet of the numbers for each chart.
2. The actual sales price, but if that isn’t possible, the asking price.
3. That for say very month going back to the dawn of time
I’m happy to do a bit of work on the numbers to try and create something good, and email it to you to see what you think. I think it could take quite a bit of trial and error to come up with something that works well.
Failing that, just the set of charts (as many as possible), all on exactly the same scale, so they would overlay correctly in an animation.
Failing that, a chart with a column for each year for each sales prices, but I don’t think that would be so easy to see.
Hi Alistair, I see what you mean. I suppose if a clever solicitor ran with my idea they could gather all the data, claim to have better data than REINZ and make money off that. Food for thought, it’s a free market we’re in. Wonder if REINZ worry about ideas like this? I guess it would be a big job for solicitors and they probably wouldn’t be bothered, but goes to show how easily and rapidly things could change. Surely the RBNZ would rather work with whomever provided the most relevant accurate data.
Steve,
I can exactly see what you want to do – it would work. However I cannot immediately see that I can provide that. The only data we have direct access to is asking price. I have set up standard reports to provide data for the monthly NZ Property Report however this does not seek to set up price band criteria by month.
We have a detailed data warehouse application in production, however we have priorities of work and therefore I cannot see us being able to produce such an analysis for quite a while yet. Will be something though that I will be keen to develop.
Thanks Alistair.
Well, I’ll just have to be patient and look forward to it.