Auckland property prices - so much data!
There are now 6 separate sets of property price measures for the Auckland market. All of which are seeking to provide an insight into the trend of price across our largest city. This barrage of statistics published in our daily newspaper is enough to confuse at best, and paralyse at worst, the most ardent of property buyer / seller / investor and even agents!
Here was how the first 2 weeks of July appeared in the Herald:
2 July: Barfoot & Thompson - Auckland's biggest real estate agency has this morning released sales data for June, showing a slight decline in sales volumes but average sale prices up $11,088 in the 30 days - which equates to a daily price rise of $369.60.
7 July: QV - QV said the Auckland region as a whole had increased 2.7 per cent over the past three months and 12.3 per cent year on year.
14 July: Realestate.co.nz - The country's largest house sales website showed Auckland's asking price hit a new all-time record of $732,240 last month.
14 July: REINZ - The stratified median housing price index showed that in Auckland, prices rose 1.6 per cent in the month
Fair to say that an average person could walk away from reading these reports from the first 2 weeks of the month with a sense of confusion as to which set of data to trust and belief. Sure they all point to rising prices and some speak to hitting a peak, but the margin of increase varies considerably as does the indication of a trend.
Charting these separate measures produces a chart that is worthy of some analysis and commentary.
First let me explain the format of the chart. All of the price data has been indexed to a base of January 2008 = 100 and all monthly data has been computed on a 12 month moving average which makes it easier to view in terms of trends and also excludes the seasonality that impacts all property stats.
As you can see there is a fairly significant disparity between the highest index in June (REINZ median price at 136 as against the lowest being the Realestate.co.nz Asking price at 126. Equally as you will see the path of the index through the property crash in 2008/9 saw some of the measures drop by 10% (QV) whilst others barely dipped into negative (REINZ median price).
Examining each of these as to their composition provides a method of evaluating the value and relevancy of each.
This measure is actually the odd-one-out within this group as it measures the advertised price or advertised search price of property coming onto the market, whereas the other sets of data analyse the outcome of sales. A noticeable aspect of this measure is 'consumer sentiment' which tends to result in over estimated values in down-turns and under estimated values in up-turns.
This may seem counter-intuitive as you would expect to see over estimation of value - the 'over-inflated expectation of sellers' in bubbly markets as we have been in in Auckland. The reality though is that whilst the vendors may genuinely have inflated expectation, their agents tend to price for search online at more conservative levels as we have seen recently.
So tracking the path of the index of Realestate.co.nz Asking Price shows it currently tracking at the lowest of the 6 indexes over the past 6 years.
The data from Barfoot & Thompson whilst not reflective of the whole of Auckland is more timely than the others and with close to 40% share of the Auckland market and representation in all suburbs, does afford it credibility.
The average sale price though is an imperfect measure of property prices as it is open to skew if the composition of sales in a month changes significantly. For this reason Barfoot & Thompson has started publishing a median price which is a more statistically valid measure of property prices. It is though interesting to see that the median price has crept ahead of the average price over the past 2 years. This situation would tend to occur when sales volumes of extreme high value properties slows in proportion to other segments of the market. This though would seem to be contrary to the data which shows $2m+ properties have doubled in each of the past 2 years, whilst sales of sub$400k priced properties have fallen off. More likely is a situation where the majority of sales in the $500,000 to $1,000,000 bracket have edged up significantly driving that median from $450,000 to $625,000 in the space of just over 3 years.
The data collated by the Real Estate Institute is the most comprehensive and timely data in that it aggregates sales records from its members as licensed real estate agents who account for around 90% of all transactions each year. The data is of unconditional contracts and thereby is recorded closer to the date of transaction than settlements registered at LINZ and utilised by QV for their data.
The REINZ median sales price has been reported monthly since 1992 and is one of the most complete data sets for the whole country. However as presented in this chart, the index is the highest of all the data sets presenting what from outside would seem to be an optimistic view of property prices as it hardly reported a dip in sales price in 2008/9.
The reason that the median price in Auckland as reported by REINZ is so out of kilter from the other metrics is exactly the reason why REINZ implemented the Stratified Median Sales Price in 2010. The Stratified price index makes adjustments within the market to ensure the composition of suburb sales is representative when the market tends to skew towards certain suburbs as has been the case in Auckland over this 7 year period. For this reason the Stratified price index provides a much more accurate representation of true price movements and the trend on the chart certainly bears this out.
The data from QV is in many ways the most accurate, yet it does suffer somewhat from lagging the other data sets, requiring as it does the data from property settlements and title changes to be registered at LINZ. Something that largely happens online nowadays and thereby removes some process time delays.
The data is not reported as a median or stratified median but is analysed to assess the actual sales price of each property sold against the estimated property valuation that QV has on record for every property in NZ. So their system and the resulting valuation index is a closer evaluation of the trend in core property values and takes into account the improvements and developments that are undertaken on properties that do materially effect the value of a property which are not accounted for in any of the other data sets and can cause skewing of data. This factor has been a driving component of the Auckland property market for many years as the pace of gentrification of the inner suburbs has seen extensive renovations drive enormous price movements.
One of the benefits though of these numerous data sets of property prices in Auckland is the ability to see the variance between these data sets on the chart and also to provide the ability to visually see the the set or sets of data that are in someways the midpoint and therefore the most likely to be the most accurate. From my reading of the data this would be the QV valuation data and the REINZ Stratified median price. Both of these data sets benefits from computational analysis by qualified and trusted professionals. In the case of the REINZ Stratified price with the assistance and guidance of the Reserve Bank and in the case of QV the professional teams of valuers and the resources and skills of Core Logic.
What I find very interesting is that it would appear that the Barfoot & Thompson median price data tracks very accurately to the trend of these other two. It may still be a bit too early to tell for sure, but the indication is clear. This could well be the result that Barfoot & Thompson sales are a true representative sample of Auckland property without extreme outliers.