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Wednesday, August 1, 2012
Goldman Sachs's analysis on Aussie house price data
The broad message across the ABS and RPData dwelling price series remains the same. There is now growing evidence that home prices are stabilizing and we view this as important pre-condition for sentiment and investors to return to the market over the coming months. In our view, attractive mortgage rates improved affordability, supportive demographic demand and favorable state Government policies will deliver a meaningful pick-up in housing construction activity over the coming year...
In addition to the upside surprise in the headline print, we note that there were also meaningful upward revisions to the March outcome - now reported as a fall of just 0.1% (initially reported as a larger -1.1%qoq decline).
Sydney made the largest contribution to this upward revision, with March quarter prices now estimated to have risen +0.8%qoq (initially reported as a -1.8%qoq fall).
Factoring in these stronger-than-expected and upwardly revised data, the ABS house price report now reflects more closely the more resilient trends evident in the RPDataRismark data set.
We note, however, that that the ABS data is less timely than the monthly indexes produced by RPDataRismark. Specifically, today's ABS report represents a quarterly average for the June quarter, while earlier this morning the RPData Rismark published an estimate for the month of July. Moreover, the ABS indexes are also only for detached houses in capital cities rather than including higher density housing and regional areas. However, there has been an important development on this latter front this month.
Specifically, the ABS has published a new "experimental" series on prices for "other" dwellings - which includes flats, units, and semi-detached houses. With the caveats that the data are currently perceived to be of lower quality than the headline house price series and run to 4Q2011 only, we note:
Over the year to 4Q2011, the new ABS series for "other" dwellings points to price falls of -3.0%yoy - comparatively less than for established houses (-4.4%yoy). We note that this -3.0%yoy decline compares with a 1.9%yoy fall in the equivalent RPData series over this period.
Over the year to 4Q2011, the new ABS series for "all" dwellings (which includes houses and "other" dwellings) points to price falls of -4.0%yoy. We note that this compares with a -4.3%yoy fall in the equivalent RPData series over this period.
Broadly consistent with the RPData on unit prices, the ABS experimental series highlights relatively greater resilience in prices for other dwellings in Sydney (-2.1%yoy) and Brisbane (-1.0%yoy), than in Melbourne (-4.4%yoy) and Perth (-5.0%yoy).
Overall, we see the new experimental series as an important step in improving the price signals from the ABS house price report - which at least over 2011 now reconcile more closely with RPData's published prices.
While it is now contingent on the ABS receiving additional funding, we hope that continued progress on the experimental series will see it updated on a more timely basis - allowing for a valuable cross-check against the new methodology which is also being used by RPData.