3.1 This section provides a history of the development of Residential Property Price Indexes in Australia.
3.2 The ABS has compiled a House Price Index since 1986. Every five years, an index review is undertaken to ensure the indexes continue to provide:
(a) a robust and accurate macroeconomic indicator of residential property price inflation; and
(b) support in the compilation of the non-financial assets component of the Household Balance sheet in the Australian System of National Accounts.
The first HPI was designed to meet the specific data requirements for the construction of a price measure for mortgage interest charges, which were included in the Consumer Price Index (CPI) from 1986 to 1998 (footnote 5
. When mortgage interest charges were removed from the CPI in 1998 as part of the 13th Series CPI Review, the ABS continued to publish the price index of established houses because of demand for the series in its own right.
A 2004 review of the HPI significantly changed the methodology of the HPI and resulted in the introduction of a new series (Series 1), first published for the September quarter 2005, with the series published back to the March quarter 2002. Subsequent reviews have further refined the methodology along with updating the value weights. Each review has resulted in a new series being created which has been linked to the existing series. Details of each of these reviews are provided below.
The ABS commenced a review of the HPI in 2004. The objectives of the review were to:
- determine specific user requirements for an updated HPI;
- identify possible data sources that were consistent and comprehensive;
- assess the costs and the strengths and weaknesses of these alternative data sources; and
- develop a strategy to deliver an improved HPI.
Four important aspects of the data series were identified as needing to be changed or improved:
- the timeliness of the HPI release (to be closer to the reference quarter);
- the time at which prices are recorded (from settlement date to the date of exchange of contracts);
- the effects of changes in the composition of properties traded to be reduced; and
- the coverage of the index - to include ‘other dwellings’ (footnote 6) (townhouses, units and apartments), and dwellings covering the regions in each State outside the capital cities.
As a result of the implementation of the review recommendations:
- the HPI was released closer to the reference quarter;
- the time at which prices are recorded (the pricing point) was changed to the date of exchange of contracts to allow earlier publication of the index;
- the effects of compositional change were reduced through an improved stratification method;
- the value weights were updated using quantity data from the 2001 Census of Population and Housing; and
- the ABS began publishing unstratified median price of transfers and the number of transfers within the capital cities.
The September quarter 2005 issue of cat. no. 6416.0 was the first to incorporate the changes outlined above. The large number of changes to the methodology resulted in a new HPI series being published (which was published back to the March quarter 2002) and the original series was discontinued. This new series is known as Series 1.
The historical series, from 1986 to 2005, continues to be available as an indicator of established house price movements over a longer period. This historical series is not directly comparable to the existing HPI series post 2002 due to the change in methodology resulting from the 2004 review.
For a more detailed discussion on the outcomes of the 2004 review, refer to Information Paper: Renovating the Established House Price Index, Nov 2005
(cat. no. 6417.0).
A second review of the HPI commenced in 2007. As a result, the method of stratification used to compile the index was refined (footnote 7
and the value weights were updated using quantity data from the 2006 Census of Population and Housing.
These changes were introduced in the December quarter 2008 issue of cat. no. 6416.0, with the new series (Series 2) being linked to the existing series (Series 1) in the March quarter 2008.
The most significant outcome of the 2012 review was the decision to publish two new indexes:
- the ADPI, an index covering flats, units and apartments plus semi-detached, row and terrace houses (i.e. attached dwellings); and
- the RPPI, an aggregation of the HPI and ADPI.
The review also implemented a number of other changes including:
- a change in the key figure from the HPI to the RPPI;
- the introduction of the TVDS, to be published quarterly as a key figure;
- the name of the publication was changed to Residential Property Price Indexes: Eight Capital Cities (cat. no. 6416.0);
- the geography of the indexes were aligned with the Australian Statistical Geography Standard (ASGS);
- the indexes were re-referenced to a new index reference period of 2011-12=100.0;
- the introduction of unstratified median prices and transfer counts for the rest of state and attached dwellings (in addition to established houses); and
- the weights and the variables used to stratify the indexes were updated using data from the 2011 Census.
These changes were introduced in the December quarter 2013 issue of cat. no. 6416.0, with the new series (Series 3) being linked to the existing series (Series 2) in the March quarter 2013.
For a more detailed discussion on the outcomes of the 2012 review, refer to Information Paper: Forthcoming changes to House Price Indexes: Eight Capital Cities, 2013
(cat. no. 6416.0.55.002).
In 2014, the RPPI work program was reviewed in response to planned reductions to the ABS work program. The outcomes of this review were implemented in the March quarter 2015.
In summary, the review resulted in:
- a change in data source used to compile the residential property price indexes and related statistics. From the March quarter 2015 the ABS has used data supplied by CoreLogic to compile these statistics;
- the price indexes no longer being revised. From the March quarter 2015 the suite of residential property price indexes are considered final;
- a change to the method used to calculate prices for compiling the total value of dwelling stock;
- unstratified median prices and number of dwelling transfers being available for the current quarter.
This review did not result in the introduction of a new index series. For more information on the implementation of the outcomes of the review please refer to the Feature Article: Implementation of the ABS Residential Property Price Index Review Outcomes
in the March quarter 2015 release.
The most recent review of the RPPIs and TVDS was conducted in 2018, with updates introduced in the December quarter 2018 issue. Outcomes of this review include:
- the weights and variables used to stratify the indexes were updated using data from the 2016 Census;
- inputs used to compile the TVDS were updated using data from the 2016 Census; and
- changes to the residential property sales dataset supplied by CoreLogic were implemented.
The new price index series (Series 4) was linked to the existing series (Series 3) at the September quarter 2018.
Updates to the TVDS were incorporated into the series over a number of quarters. A two year window was used to smooth in the change for the Household series, while a four year window was used for the Non-Household series. This approach is in line with standard ABS practice for introducing changes and does not impact the interpretation of the data.
The implementation of the updated residential property sales dataset supplied by CoreLogic from the December quarter 2018 resulted in revisions to the median price and transfers series. This series has been revised back to March quarter 2014 when CoreLogic data was introduced into this series.
Details of the concepts, sources and methods underlying the compilation of the current index series (Series 4) are described in the following sections.
For details on the methodology used to compile this historical series see Information Paper: Renovating the Established House Price Index, Nov 2005
(cat. no. 6417.0). <back
Now known as ‘attached dwellings’. <back
See Research Paper: Refining the Stratification for the Established House Price Index (Methodology Advisory Committee), Jun 2008
(cat. no. 1352.0.55.093). <back