6464.0 - Residential Property Price Indexes: Concepts, Sources and Methods, 2018  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 19/03/2019   
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OTHER OUTPUTS AND DISSEMINATION

INTRODUCTION

11.1 This section describes the residential property price data released by the ABS and provides users with some guidance on interpretation.


PUBLICATION OF STATISTICS

11.2 The Residential Property Price Indexes, Eight Capital Cities (cat. no. 6416.0) is compiled and published quarterly. The RPPI is published approximately twelve weeks after the end of the reference quarter. The quarterly RPPI announces publication dates for each of the next four quarters.

11.3 The statistics released in Residential Property Price Indexes, Eight Capital Cities (cat. no. 6416.0) are disseminated via several different mechanisms. Available free of charge on the ABS website <www.abs.gov.au> are:

      • the main findings in HTML format;
      • time series spreadsheets, downloadable in Microsoft Excel format; and
      • a historical table of the House Price Index using previous methodology, downloadable in Microsoft Excel format.
    11.4 In addition to the publication of stratified and weighted price indexes and the Total Value of the Dwelling Stock, the ABS publishes, for each capital city and the rest of state:
        • Median prices of all established houses and attached dwellings transfers, and
        • The number of established houses and attached dwellings transfers.
      11.5 The median prices of all established houses and attached dwellings transfers are calculated with no stratification or weighting applied. These ‘raw’ medians will not correspond to the published index numbers and will not produce price movements that are consistent with those numbers.

      11.6 The number of transfers of established houses and attached dwellings provides an indication of the level of sales activity for each quarter.

      11.7 From the March quarter 2015 publication, the ABS has used the CoreLogic residential property sales dataset, which includes real estate agents data to calculate the series from the March quarter 2014. There are differences in the numbers produced using the new data source compared to the previous data source (which contained VGs data only). Therefore, users should apply caution when comparing data prior to March quarter 2014 with data after March quarter 2014.

      11.8 From the December quarter 2018 publication, the residential property sales dataset supplied by CoreLogic incorporates a number of improvements. CoreLogic has provided the ABS with an updated dataset back to the March quarter 2014. This has resulted in historical revisions to the unstratified median and transfers series extending back to the March quarter 2014. Users should continue to apply caution when comparing data prior to March quarter 2014 with data after March quarter 2014.

      11.9 As the ABS receives more unit record residential property sales data, the median price of all established houses and attached dwellings transfers and the number of houses and attached dwellings transfers are revised as necessary. The usual practice is to update the most recent ten quarters of published figures.


      Comparing Indexes to Total Value of dwelling outputs

      11.10 Users should exercise caution in comparing price movements in the indexes and changes in the value of the dwelling stock and its components. The indexes are designed to measure the change in value of the stock of dwellings in the capital cities fixed at the last Census, whereas TVDS is designed to measure the current value of the dwelling stock in the State and Territories. As such, movements in the value of the dwelling stock are a result of changes in the price and quantity of dwellings. Movements in the indexes represents price change only.

      Comparing Medians and Means

      11.11 Users should exercise caution when comparing the unstratified median prices and the mean value of dwellings. The unstratified median price (for established houses and attached dwellings) of dwelling transfers over the reference period is the mid-point of all properties bought/sold in the period. In contrast, the mean value of residential dwellings, represent what the average dwelling value was in the reference period. Additionally, the mean values are calculated across the whole of state and for all dwelling types, whereas the medians are calculated for individual dwelling types and for the capital city and rest of state separately.


      INTERPRETING INDEX NUMBERS

      11.12 Movements in indexes from one period to any other period can be expressed either as changes in index points or as percentage changes. The following example illustrates the method of calculating index points changes and percentage changes between two periods:

      Established Houses: Sydney index numbers (see Table 2) -
      December Quarter 2018 165.4
      less September Quarter 2018 172.1
      equals change in index points -6.7
      Percentage change -6.7/172.1 x 100 = -3.9%
          11.13 For most applications, movements in price indexes are best calculated and presented in terms of percentage change. Percentage change allows comparisons in movements that are independent of the level of the index. For example, a change of 2.0 index points when the index number is 120.0 is equivalent to a change of 1.7%, but if the index number were 80.0 a change of 2.0 index points would be equivalent to a change of 2.5%, a significantly different rate of price change. Only when measuring change from the index reference period will the points change be numerically identical to the percentage change.

          11.14 The percentage change between any two periods must be calculated, as in the example above, by direct reference to the index numbers for the two periods. Adding the individual quarterly percentage changes will not result in the correct measure of longer-term percentage change. In other words, the percentage change between, say, the June quarter one year and the June quarter of the following year will not necessarily equal the sum of the four quarterly percentage changes. The error becomes more noticeable the longer the period covered and the greater the rate of change in the index. This can readily be verified by starting with an index of 100 and increasing it by 10% (multiplying by 1.1) each period. After four periods, the index will equal 146.4 delivering a through-the-year percentage change of 46.4%, not the 40.0% obtained by adding the four quarterly changes of 10.0 per cent.

          11.15 Residential Property Price indexes produced by the ABS are published with percentage changes calculated to illustrate two different kinds of movements:
              • movements between corresponding quarters of consecutive years; and
              • movements between consecutive quarters.

            11.16 Index numbers for financial years can be calculated as simple, arithmetic, averages of the four quarterly index numbers for the financial year. The following example illustrates the method of calculating the financial year index number for 2017-18:

            Established Houses: Sydney index numbers:
            September Quarter 2017 180.9
            plus December Quarter 2017 180.5
            plus March Quarter 2018 178.0
            plus June Quarter 2018 175.8
            equals 715.2
            Financial year 2017-18 Index 715.2/4 = 178.8


            RELIABILITY OF INDEXES

            11.17 The number of price observations available to compile the indexes each quarter depends on market activity. For the smaller capital cities (Hobart, Darwin and Canberra) there are occasions when strata have low numbers of price observations. Rather than suppress publication of the series they are included as the long term trends are considered reliable. Care should be exercised when analysing the indexes quarter-to-quarter movements of the smaller capital cities.


            HISTORICAL SERIES AVAILABLE

            11.18 As noted above, the HPI series compiled under the previous methodology (prior to the 2004 review) is published on the ABS website for users to access. This series commences in June quarter 1986 and concludes in June quarter 2005.

            11.19 The ABS does not recommend linking the historical and the current series due to the different methodologies used.


            PRACTICAL CONSIDERATIONS

            11.20 The final decision for determining the appropriateness or otherwise of the residential property price indexes for any particular application lies with the end user. While the ABS can provide technical and statistical guidance, it does not provide advice on indexation practices, nor can it tell users which index would best suit any particular use. See Appendix 1, Use of Price Indexes in Contracts, for further information.