First things first. The ABS has upwardly revised its March quarter estimate of Australian house price change from a devastatingly negative -2.2%, which attracted mountains of media attention at the time for being one of the largest quarterly falls on record, to -1.5% just a few months ago, to merely -0.8% today, which looks trivial in the scheme of things.
This is exactly what we predicted back when the first cut of the ABS results were initially released. As I went to some lengths to explain earlier this year, there was a “January effect” biasing down the ABS numbers due to the dominance of January sales allowed via the averaging process in its quarterly methodology (compared with February and March) combined with the compositional impact of a spike in first time buyers acquiring cheaper properties due to the government’s stimulus. Unfortunately, these compositional biases afflict the (stratified) median price indices used by APM and the ABS.
Interestingly, there have been no such revisions to the ABS’s second quarter estimate of +4.2% house price growth, which, given the consistency of both capital growth and sales volumes through this period according to our measure, is broadly what one would expect. (In fact, one might anticipate an upward bias in the median price numbers as first time buyers fade out of the market.)
For the first nine months of the year, the ABS’s estimate of detached house price growth of 7.6% has now almost exactly caught up to the RP Data-Rismark hedonic estimate of +7.9% (for detached houses). But, of course, the ABS was more than one quarter late in identifying the rebound in the Australian housing market, which, according to our monthly measure, started in January 2009.
Source: RP Data-Rismark; ABS (click to enlarge)Finally, on the basis of the ABS’s numbers, the Australian house price index is 2.6% above its March 2008 peak. Associate Professor Steve Keen has therefore formally lost his bet with Macquarie Bank’s Rory Robertson and will soon commence his long march from Canberra to Mount Kosciusko wearing a t-shirt emblazoned with the message, “I was hopelessly wrong on house prices! Ask me how” (see chart).
Source: ABS; Rismark International (click to enlarge)
