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FEATURE ARTICLE: OUTCOMES OF THE ABS RESIDENTIAL PROPERTY PRICE INDEX REVIEW
4. The ABS will implement the Review outcomes from the March quarter 2015 which is scheduled for release on 23 June 2015.
1. On the 5th June 2014, the Acting Australian Statistician announced planned reductions to the Australian Bureau of Statistics (ABS) work program. This announcement included a Review of the Residential Property Price Indexes, with the view to discontinuing it pending identification of alternative sources to meet the Australian National Accounts and other requirements.
2. This article describes the findings from the review and includes:
THE CURRENT SUITE OF OUTPUTS
3. The set of statistics published in Residential Property Price Indexes, Eight Capital Cities (cat.no. 6416.0) includes:
The current process to produce these outputs
The Residential Property Price Indexes
4. The ABS obtains residential property transfers/sales data from State and Territory Land Titles Office or Valuers-General Office in each capital city (collectively referred to as VGs).
5. The residential sales data received from the VGs is combined into a single file, address coded and mapped onto common classifications.
6. The unit record file is used to produce the established House Price Index (HPI); Attached Dwellings Price Index (ADPI); and the aggregated Residential Property Price Index (RPPI). These indexes are produced by stratifying the past three quarter’s residential sales, calculating median prices by stratum and then calculating stratum level price indexes. These stratum indexes are then weighted together to produce the suite of residential property price indexes. Indexes for quarters ‘t-1’ and ‘t-2’ are recalculated and revised in period ‘t’ to account for updated sales data received from VGs. See Residential Property Price Indexes: Concepts, Sources and Methods, 2014 (cat. no 6464.0) for further information on the index methodology.
7. The Residential Property Price Indexes: Eight Capital Cities (cat. no. 6416.0) publication is currently released six weeks after the end of the reference quarter.
8. Consultation with a range of users found that the ABS RPPIs are considered to be of high quality with a transparent methodology, and are valued for their independence. The indexes are directly used in a variety of policy and investment decisions, as well as modelling and macroeconomic analysis.
9. There is strong support from stakeholders for the ABS continuing to produce a core set of residential property price indexes to meet their requirements.
The Total Value of the Dwelling Stock (TVDS)
10. The ABS price indexes are an essential input to the compilation of the Total Value of the Dwelling Stock (TVDS).
11. The TVDS supports the compilation of the non-financial assets component of the Household Balance Sheet in the quarterly and annual National Accounts. The TVDS is used by the Reserve Bank of Australia (RBA) in Table E1, Household and Business Balance Sheets of the RBAs Statistical Tables.
12. The current method to produce the TVDS involves stratifying for each state and territory the dwelling stock by small areas and dwelling type and then calculating a price and quantity component for each stratum. The price and quantity components are multiplied to create a value for each stratum. These strata are aggregated to produce a TVDS for each state and territory and a total for Australia.
13. The quantities by strata of the TVDS are calculated by taking 2011 Census data of the number of dwellings as a benchmark and then adjusting this value each quarter by the number of new dwellings (additions) minus demolitions.
14. The prices by strata are calculated using two methods depending on the reference quarter. The ABS price indexes are used in the calculation of the price component of the value of dwelling stock for the two most recent quarters (i.e. quarters ‘t’ and ‘t-1’). A mean price by stratum from quarter ‘t-2’ is moved forward by the movements in the capital city level RPPIs as there are insufficient VGs observations to calculate mean prices at the stratum level in quarters ‘t’ and ‘t-1’. For the third most recent quarter (i.e. quarter ‘t-2’) the price component is directly calculated from VG’s data as mean prices by strata.
15. The unstratified median price and a count of property transfers by capital city and rest of state are also produced from the transformed VGs data.
ALTERNATE METHODS AND DATA SOURCES TO MEET THE AUSTRALIAN NATIONAL ACCOUNTS AND OTHER REQUIREMENTS
Continuing to meet the National Accounts requirements
Alternate TVDS methods and sources
(i) Purchasing Total Value of the Dwelling Stock Data
16. No alternate aggregate TVDS data sources were identified by the Review team that fulfil the National Accounts requirements at an affordable cost.
(ii) An alternate ABS approach
17. An alternate ABS approach to produce the TVDS data for National Accounts is detailed below. This approach involves the ABS continuing to produce each of the required inputs (including a core set of price indexes) and aligning the timing of the release of the TVDS data with the Australian National Accounts: Financial Accounts (cat. no 5232.0).
18. There is no change to the method to produce the TVDS quantities by strata.
19. Aligning the calculation and release of the TVDS with the Financial Accounts causes a delay to the current timetable to produce the TVDS by approximately six weeks(footnote 1) .
20. The change in timing to align the calculation and release of the TVDS with the Financial Accounts has an impact on the method of calculation of prices for the TVDS. This is because a greater number of dwelling transactions would be available to calculate mean prices prior to this ‘new’ release date.
21. Investigations by the Review Team shows delaying the calculation and release of the TVDS enables mean prices to be calculated directly from available data for quarters ‘t-2’ and ‘t-1’. Insufficient unit records in quarter ‘t’ results in the need for price indexes to be used to estimate the price component of the value of dwelling stock for current quarter ‘t’. In quarter ‘t’ a mean price by stratum from quarter ‘t-1’ would be moved forward by the movements in the capital city level RPPIs.
22. The price indexes used to compile the TVDS in quarter ‘t’ could, in theory, be calculated by the ABS or sourced externally.
23. Sourcing a set of residential property price indexes externally was considered as part of this Review. It was determined that the externally available indexes were not suited to ABS requirements. This followed an assessment of methodology, cost and receiving input from users. The ABS will continue to produce a core set of residential property price indexes to meet National Accounts and other requirements.
24. There is an on-going assessment of unit record data sources from which the ABS can produce the core set of residential property price indexes. Alternate data sources are currently being assessed and will be pursued where the ABS is able to produce high quality statistics at reduced cost. Any changes to the unit record data sources will be publically announced in the Residential Property Price Indexes: Eight Capital Cities (cat. no. 6416.0) publication.
THE WAY FORWARD
25. The Review outcomes result in the ABS producing a set of outputs that continues to meet key user needs.
26. The ABS will implement the Review outcomes from the March quarter 2015.
1 Appendix 1 lists the release dates from the March quarter 2015 onwards. <back
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