Is it a buyers' market for property at the moment or not? Opinion piece.

By Andrea Milner

Institute president Murray Cleland said that other statistics released earlier this week were based on property settlements rather than on the institute’s unconditional sales figures, “and were therefore by definition four to six weeks out of date,” reflecting sales in September and October.

“Our figures are as of 5pm on 30 November and therefore the most comprehensive and up-to-date figures available,” Cleland said, claiming, “Recent suggestions that the market was a buyers market and that prices were falling weren’t borne out by the latest statistics … They show the market has rallied yet again, underwritten by buying demand and the cost of new housing”.

Economists I spoke to did not buy into this positive spin. The REINZ dismissing the ‘doom and gloom’ appeared to be aimed at the QV monthly house price growth release, which came out over the weekend and said prices had fallen.

The REINZ often seems to try to discredit the QV report, perhaps because the QV measure generally comes out before that of the REINZ and regularly gets prominence in the newspaper (the last one stirred up a lot of interest).

ASB chief economist Nick Tuffley explains the QV quarterly index is considered the most reliable measure, as it attempts to compare like-to-like house price movements. Sales prices are compared to sold houses’ capital valuations. The ratio of price to capital valuation for houses sold in a given region is then applied to all properties in the area, giving a valuation of all houses in that area.

The methodology means that price movements get tied to movements in the valuations of individual houses and distortions through shifts in the composition of houses sold in a given month are removed. The QV figures calculate annual growth in the latest three months, though not all of the final sales for the period are used. Essentially, the figures are a three-month average of the annual growth figure. The REINZ is correct, however, that the QV index is hardly timely – it comes out over four months after the end of the quarter.

The REINZ median house price figures are based off sales in the latest month only – they are the ‘freshest’ news – and the only measure that includes key sales and days to sell data. However the drawbacks of the REINZ price data are that the composition of houses sold will change from month to month e.g. differing values/qualities and sizes.