As I explained in this post, RP Data is Australia's largest real estate data company with 330 professional staff, more than 150 million property data records, a market cap over $200 million, and an annual data-acquisition budget north of $10 million. In fact, RP Data spends more each year collecting data than many competitors generate in gross revenue.
Personally, I've always enjoyed Louis's company, and have found him to be engaging. But he is no stranger to controversial claims. For example, in his bio, Louis says: "In his role at Australian Property Monitors Louis was also the creator of the stratified housing price index, which was first published by the Reserve Bank of Australia in 2005, and is published regularly today." Yet both RBA officials and Australian Property Monitors dispute this noting that the stratified median price index was, in actual fact, created by the RBA, not APM or Louis. In this media release, APM says:
"APM uses a stratified median price methodology developed by the Reserve Bank of Australia (RBA) in its Research Discussion Paper RDP 2006-04: “Measuring Housing Price Growth – Using Stratification to Improve Median-based Measures”."
Yesterday RP Data sought to correct some unambiguously erroneous remarks Louis had made about RP Data-Rismark's daily house price index, which he had widely promoted in SQM press releases. I have enclosed excerpts below:
“Their daily hedonic index, for which these claims are based on, is an unreliable index as it is based on a miniscule proportion of actual sales that happen on a daily basis. Effectively on a day to day basis, the index misses out on over 95% of sales. And since it is an unrevised index, it means those missing sales are never taken into account”
RP Data Rismark response:
“The above statement is categorically incorrect,” says RP Data National Research Director Tim Lawless and Rismark CEO Ben Skilbeck. The RP Data-Rismark index uses all available sales information. Yes all: not just for the current day, but also all historical data. The index then produces the best estimate of the current state of the market from this data. Where sales data is not received the day of contract exchange, it is not ignored or unutilised, as Mr Christopher suggests. It is used in statistical and mathematical methods to account for the timing difference between the sale date and the date we receive the information. If we receive information about a sale one week after it has occurred, we use that sale to update our current view of the market, mathematically taking into account that the sale occurred one week ago. The information in that sale is still very much relevant to determining the current state of the market and our models therefore incorporate it."
RP Data then point out some additional errors in Louis' claims:
Mr Lawless and Mr Skilbeck continued, "In yesterday’s SQM Newsletter the [RP Data-Rismark] index was criticised because of an example of where it was claimed the index fell by 1% on a given day. The fact is that the index change was 0.99/630.64, a decline of only 0.16% [ie, what SQM said was completely wrong]."
"SQM Research claims that because the Melbourne index fell after a February rise that this is evidence that the increase in February must have not been correct. This claim is also wrong. Markets do not follow a straight point to point [linear] trajectory in any direction. They do, however, demonstrate natural volatility and seasonality as they traverse their path. [Historically, house prices normally rise in February and March due to seasonality.]"
"Prior to the daily RP Data-Rismark index, these daily market movements were not observable in the Australian residential property market. A movement of 1% or 2% over the course of a month is negligible when compared with the movement in the stock market over a similar period. [The daily index annual volatility of around 6% per annum is also very low in comparison to most other asset-class benchmarks.]"
"RP Data and Rismark are the only housing market index providers to have commissioned independent audits of our methodologies. The results of these assessments can be viewed on the RP Data web site here. Additionally, white papers detailing the index construction and methodology are also available at the same link."