Make the numbers work for you. Demystifying real estate statistics.
Terry Ryder, founder, hotspotting.com.au
Next time you see a media report on what’s happening with capital city rentals or prices around Australia, be sceptical.
Journalists will report the figures from a big-name research company as factual data – but a comparison of figures from multiple sources shows you cannot put too much faith in the numbers. Statistics from three different sources are likely to tell three different stories.
It’s important for real estate consumers to realise that they cannot treat published real estate as gospel truth – and that it would be unwise to make important investment decisions based on these kinds of figures.
In a recent study, I compared the latest data on the annual growth in house rents in the eight state and territory capital cities from three different firms, all of them regularly quoted in media as reputable sources of property information.
The comparison showed very few points of agreement among the three sources. Based on these numbers, the only things we can say with any confidence are …
• Perth rents have decreased significantly.
• Darwin rents are also falling (although there is considerable disagreement about how much).
• Rents are rising in Canberra and Hobart (but the level of growth is uncertain).
Beyond those few meagre instances, it’s a sea of disagreement and contradiction.
One source reports a 4% annual rise in Sydney house rents, but the other two report that rents have fallen in the past year. There are similar differences on house rents for Melbourne, Brisbane and Adelaide.
Hobart, which continues to deliver generally positive numbers on prices, rents and vacancies, appears to have rental growth – but the rate of growth varies from 1.4% (Residex) to 6.0% (CoreLogic).
Two sources give Canberra moderate rental growth around 2-3% but SQM Research says Canberra house rents are up 11% in annual terms. That’s quite a difference.
Darwin’s market has been falling for the past three years and rents are down in the past 12 months, but while SQM reports a 2.1% decrease, Residex says 6% and CoreLogic 10.8%.
It’s a similar story with published statistics on price growth. Take for example the figures for growth in apartment prices in capital city Australia over 12 months. CoreLogic says that overall values are up 6%, SQM Research says the rise is 3.8%, while Domain reports they haven’t risen at all, recording a 0.1% change (which, in essence, means no change).
Did Sydney house prices rise 9% in the past 12 months? CoreLogic says they did. But SQM claims they’re up only 3.5% while Domain says annual price growth is just 1.2%.
What are we meant to believe? Every one of these growth figures, and many more like them, have been reported by media as fact. Yet one set of figures contradicts the others.
Two major research sources say Brisbane apartment prices have risen, while two others say they’ve fallen.
Consumers are entitled to believe that the direction of prices in a market is a matter of fact, yet big-name research entities often can’t achieve any kind of consensus on the state of individual markets.
Darwin apartment prices are either unchanged, or have dropped 15%, depending on whose figures you choose to believe.
Such disparities are all too common.
The message for consumers is that they must treat real estate statistics with considerable caution. A wise investor will never base an important financial decision on the price data published in media.
Decisions on where to buy should be based on underlying fundamentals – the economy, unemployment, population growth, existing infrastructure and plans for spending on new infrastructure.