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RBNZ and REINZ introduce new house price inflation measure (Update 1)
August 7th, 2009The Reserve Bank of New Zealand (RBNZ) and the Real Estate Institute of New Zealand (REINZ) announced they had developed a stratified housing price measure to provide a “timely” reading of house price inflation in New Zealand that avoided being skewed by sales in particular sectors. (Update 1 includes REINZ comments.)
The new measure uses monthly data supplied by the REINZ, and produces results close to QV’s quarterly index, but in a quicker time-frame, the RBNZ said. There will be indexes for Auckland, Wellington and the rest of the North Island, Christchurch and the rest of the South Island. There will also be a REINZ Monthly Residential Section Price Index.
The RBNZ has released a discussion paper, titled ‘Developing stratified housing price measures for New Zealand‘, which says the new “measure produces estimates of housing price inflation that accord closely with the accurate but less timely figures obtained from the QV Quarterly House Price Index.”
The RBNZ worked with the REINZ to come up with the stratification measure which the REINZ will release each month. The first release will be on August 14.
“(T)he current monthly REINZ median housing price is timely, but changes in the mix of properties sold each month can make it difficult to identify residential property price trends,” RBNZ Assistant Governor John McDermott said.
“A changing proportion of more (or less) expensive housing being actually sold in one month can move the median sale price even if the market prices for all properties have not changed,” McDermott said.
“The REINZ housing price index is put together using a technique known as stratification; basically it is an average of sale prices for common groups,” the RBNZ said.
“Obtaining timely signals on housing prices are important for analysis of the New Zealand economy. Given their close historical linkage with household consumption, changes in housing prices can provide a useful gauge of household demand conditions. This more timely measure of housing price movements will allow the Bank to identify housing market trends more quickly.”
“The REINZ Monthly Housing Price Index is a new development and is based on detailed suburb-level data. Future improvements, including updating comparison periods, investigating complementary data sources, and the introduction of new regional areas will be introduced periodically.”
REINZ President Mike Elford said the new measure will take their current analysis a step further.
“Because our information is based on medians, if there is a significant change in a particular housing bracket it can skew the result. For example, if an unusually high number of homes in the $1 million-plus bracket were sold in one month, the median price could rise overall, even if the price for most mid-range homes remained the same,” Elford said.
We welcome your insight and comments below. The link to the full paper is above.
Tags: House prices, Inflation, John McDermott, Mike Elford, RBNZ, REINZ
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August 7th, 2009 at 11:53 am
Aargh. RBNZ, just adopt the Case-Shiller methodology already, as I think you are hinting in the conclusion. People barely understand the QV index and this one is vastly more complicated. It’s interesting that virtually the only difference between the QV index and this one is that it makes the recent dead-cat-bounce look better (Figure 16).
Nice to see the REINZ acknowledging that the QV index really is more accurate than their medians though. And REINZ market share fell as low as 76% of all transactions in 2003 and is only recently back to 84% (Figure 10).
August 7th, 2009 at 12:41 pm
I would be suss about any methodology that had the input of REINZ in its design, hardly likely to be dispassionate. Even some of the RBNZ info can seem less than disinterested at times, they have their own little agendas. And if they are needing the support of REINZ in making the system work, it is likely to have REINZ mucky fingerprints all over it.
Look at the differences between the various US metrics – the likes of OFHEO has no credibility at all. Case-Shiller is seen as even handed and insightful. I would like to see university academics involved in a model in NZ. It is very hard to get a clear picture in NZ on housing price movements, & not likely to improve.
August 7th, 2009 at 5:09 pm
“(T)he current monthly REINZ median housing price is timely, but changes in the mix of properties sold each month can make it difficult to identify residential property price trends,” RBNZ Assistant Governor John McDermott said.
“A changing proportion of more (or less) expensive housing being actually sold in one month can move the median sale price even if the market prices for all properties have not changed,” McDermott said.
Now isn’t that what I have been saying for a yr now?
Then If they have done it right, and ‘back date ‘ stats, Bernard’s, and a lot of the rest of use will certainly be a damn sight closer in our predictions…
August 7th, 2009 at 5:34 pm
RBNZ and REINZ getting together – does anybody take what either says seriously anymore?
August 7th, 2009 at 7:39 pm
Agree with the others who name Case-Schiller as the benchmark for this kind of data.
Housing plays a large role in New Zealand’s economy so please let us get some sensible data on it from neutral sources.
August 8th, 2009 at 3:25 am
The Case-Schiller methodology is without doubt the most accurate representation of property price movements as it take paired sales analysis. However there is one fundamental reason why NZ cannot have a Case Schiller – scale.
The average US property transactions per month = 320,000
The average NZ property transactions per month = 6,500
The probability of finding paired sales stats of same house to do a year on year analysis is probably 1 in 200 sales (I concede I do not know). However based on that ratio therefore in the US the data set of Case-Schiller would be around 1,600 properties per month, in NZ it would be 32 properties.
Our data set in NZ as a function of scale will always leave us wishing we had more accurate information, all I would say is be grateful we have the richness of data we have – many countries (UK and Ireland) to name just two do not have monthly property sales and price data or any equivalent QV type data.
August 8th, 2009 at 6:33 am
Sorry, Have I missed something here? Are we to believe the RBNZ has finally woken from its slumber and discovered they have no way of knowing what the hell is happening in residential property? Or is this another effort to deflect the scream for something known as ‘action’, or ‘proactive policy’, you know, where you get off you bum and do something apart from blathering!
August 8th, 2009 at 6:52 am
Interesting article from Brian Gaynor today in the Herald in which he says “Our politicians bend over backwards, both in terms of tax treatment and political pressure, to support housing speculation, yet they offer virtually no assistance to businesses that want to fund growth, create jobs and generate badly needed foreign exchange” well gosh and golly gosh, who would have thought that. Now why would our politicians bend over backwards, I mean I can see a valid reason why they should all have to bend over forwards frequently but this backward stuff! Couldn’t have anything to do with self interest could it? Well it’s either that or it’s many years of stupid policies dumped on the country by stupid people. Or both!
August 11th, 2009 at 8:35 am
I agree Wally
No one knows where the housing market in this country is going it is all speculation even on the Economists (Fortune Tellers LOL) Prediction.
August 11th, 2009 at 8:58 am
Alistair Helm Says:
“The probability of finding paired sales stats of same house to do a year on year analysis is probably 1 in 200 sales (I concede I do not know).”
I have the records for a sth Auckland sunburb from middle 2007
Approx 800 sales 46 resales, several have been resold more than 2x.
August 11th, 2009 at 9:05 am
And…? Steps…
I’m waiting with abated breath for the stats. on those 46…..