As many of you are aware there has been a great deal of negative publicity surrounding property prices at the moment. Many respected journalists and publications have been communicating a 2.1% fall in prices during the March quarter, however the opinion of Residex CEO John Edwards is that the figure has been misinterpreted based on poorly calculated seasonal adjusting.
John Edwards stated in his blog:
So what happened? A well-known Australian research company within the industry reported that home values across Australia softened by -2.1 per cent (seasonally adjusted) over the March quarter (-0.4 per cent in raw terms). The raw number was the real result or close to it. (Residex, have reported that houses fell in value by 0.55 per cent for the quarter while units in fact increased in value by 0.65 per cent.)
It is not the fault of journalists who reported that house values fell by 2.1 per cent. In reading what was written, you could be forgiven for interpreting the large fall. However, what was really meant by what was said?
Over the long term, the usual growth rate in property in the March quarter is 1.7 per cent (as calculated by them) and during the March quarter just past, house values didn’t perform as well as they typically do, which is producing a growth rate of the 1.7 per cent. Values fell by 0.4 per cent, meaning they performed 2.1 per cent worse than they typically do on average in a March quarter – so no great fall, just worse than what is typically.
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