FEATURE ARTICLE: IMPLEMENTATION OF THE ABS RESIDENTIAL PROPERTY PRICE INDEX REVIEW OUTCOMES


INTRODUCTION

A review of the Residential Property Price Indexes was undertaken in 2014 as a response to planned reductions to the ABS work program. The outcomes of the review were documented in a feature article in the September 2014 issue of the Residential Property Price Indexes: Eight Capital Cities (cat. no. 6416.0). Please see, Feature Article: Outcomes of the ABS Residential Property Price Index Review.

This article describes the implementation of the review outcomes including changes to the methods, and supporting data sources, to produce cost effective, fit for purpose statistics to meet the Australian National Accounts and other requirements.

The implementation of the review outcomes is occurring in the March quarter 2015 issue of the Residential Property Price Indexes: Eight Capital Cities (cat. no. 6416.0).


BACKGROUND

The Review was completed following extensive consultation with a range of stakeholders.

The Review outcomes are:

• The ABS will publish a core set of residential property price indexes (RPPIs). However, these indexes will be released approximately six weeks later (footnote 1) than the current timetable resulting in the indexes no longer needing to be revised. This approach achieves cost savings for the ABS. The outputs will continue to include the House Price Index, the Attached Dwellings Price Index and the Residential Property Price Index.
• The ABS will publish an unstratified median price and the number of dwelling transfers by capital city and rest of state up to the current quarter.
• The ABS will produce the total value of dwelling stock estimates and each of the required inputs to satisfy National Accounts requirements.
• The ABS will align the timing of the calculation and release of the total value of dwelling stock estimates and the residential property price indexes with the Australian National Accounts: Finance and Wealth (cat. no. 5232.0).

CHANGES TO METHODS AND DATA SOURCES FROM THE MARCH QUARTER 2015

CHANGE IN THE DATA SOURCE

The Review identified an alternative data source from which to compile the range of price indexes and related statistics. This alternate data source enables the ABS to produce high quality statistics at reduced cost.

The ABS previously obtained residential property sales/transfers data from State and Territory Land Titles Office or Valuers-General Office in each capital city (collectively referred to as VGs). The VGs property sales data was supplemented with mortgage lenders data.

All Australian residential property sales data are now supplied to the ABS by CoreLogic RP Data. The CoreLogic RP Data dataset is a combination of residential property sales data obtained from VGs and real estate agents data provided to CoreLogic RP Data(footnote 2) . The ABS applies classifications to this dataset to create the residential property sales dataset from which the price indexes and related statistics are produced.

The change in the source of the unit record file has resulted in some revisions to previously published estimates. These revisions are a result of the improved coverage and classification of residential dwellings transactions in the new dataset. The methodological treatment of these revisions is described in more detail below.


FROM THE MARCH QUARTER 2015 INDEXES WILL BE PUBLISHED AS FINAL

The alignment of the release date with the Australian National Accounts: Finance and Wealth (cat. no. 5232.0) enables a greater proportion of residential property transactions to be captured within the current quarter.

There is a known lag between the time an agreement is reached between two parties to sell/purchase a residential property and the ABS receiving the data relating to the transaction. Historically the ABS has considered the two most recent quarters preliminary (which were subject to revisions) and used mortgage lenders information to supplement the VGs data. The third most recent quarter was compiled exclusively from VGs records and was considered final.

As a result of the change to the release date of the publication and the improved coverage of the new source of unit record data, the ABS will no longer be producing preliminary RPPIs in the two most recent quarters and then revising these estimates in subsequent quarters.

This change means that the index numbers published for the March quarter 2015 are considered final. The September quarter 2014 and the December quarter 2014 indexes which have been previously published as preliminary have been revised and are now published as final.

The indexes are produced by stratifying residential property sales, calculating median prices by stratum and then calculating stratum level price indexes. These stratum indexes are then weighted together to produce the suite of residential property price indexes. The strata medians are now being produced using the new unit record dataset (a combination of VGs and real estate agents data) obtained from CoreLogic RP Data.

There will be no change to the weights or stratification variables used in the indexes, nor will the methodology used to aggregate the indexes change.

A further consequence of the changes to the revisions process is the removal of Table 7, Revisions to Residential Property Price Index Series. This table will be published for the last time in the March quarter 2015 issue.


CHANGES TO THE METHODOLOGY FOR PRODUCING THE TVDS

The method to produce the TVDS involves stratifying the dwelling stock of each state and territory by small areas and dwelling type and then calculating a price and quantity component for each stratum. The price and quantity components are multiplied to create a total value for each stratum. These strata are aggregated together to produce a TVDS for each state and territory and a total for Australia.

There is no change to the method to produce the TVDS quantities by strata. The prices by strata are calculated using two methods depending on the reference quarter.

Prior to the March quarter 2015, the ABS RPPIs were used in the calculation of the price component of the value of dwelling stock for the two most recent quarters. A mean price by stratum from the third most recent quarter ('t-2') was moved forward by the movements in the capital city level RPPIs, as there were insufficient unit records to calculate mean prices at the stratum level for these quarters. The third most recent quarter price component was directly calculated from unit record data as mean prices by strata.

The change in timing to align the calculation and release of the TVDS with the Australian National Accounts: Finance and Wealth (cat. no. 5232.0) has an impact on the method of calculation of prices for the TVDS. This is because a greater number of residential property transactions are available for the calculation of the mean prices prior to the 'new' release date.

Mean prices are now calculated directly from available unit records for the second ('t-1') and third ('t-2') most recent quarters. Insufficient unit records in the most recent quarter ('t') results in the need for price indexes to continue to be used to estimate the price component of the value of dwelling stock for the current quarter ('t'). In quarter 't' a mean price by stratum from quarter 't-1' is moved forward by the movements in the capital city level RPPIs.

Revisions to the TVDS will continue to be applied to both the second and third most recent quarters ('t-1' and 't-2'). These figures are revised due to updated completions and unit record residential property transfers data becoming available to use in the direct calculation of quantity and price.

The TVDS estimates are considered preliminary in the most recent ('t') and second ('t-1') most recent quarters and final in the third ('t-2') most recent quarter, as demonstrated in the table below.

Composition of data used to compile the Total Value of Dwelling Stock
	Period t-2 (Final)	Period t-1 (Revised)	Period t (Preliminary)
Price	Directly calculated from unit record data	Directly calculated from unit record data	Calculated from RPPI index movements
Quantity	Calculated directly with completions data	Calculated directly with completions data	Calculated from the long term average growth rates

The change in data source to CoreLogic RP Data, and the resulting increased coverage due to improved classification of residential dwellings, has resulted in some revisions to the previously published TVDS estimates. The June quarter 2014 has been chosen to introduce the new dataset and revisions will be applied back to March quarter 2013. At June quarter 2014 the revision is approximately -0.8% of the TVDS at the Australia level.

The ABS has smoothed in the change between March quarter 2013 and June quarter 2014. This approach is in line with standard ABS practice for introducing changes and does not impact the interpretation of the data.

The following graph illustrates the previously published (December quarter 2014) and revised series published in this issue (March quarter 2015).

Other Outputs

The unstratified median price and the number of dwelling transfers by capital city and rest of state will continue to be published in Tables 4 and 5. Historically these series were based on the VGs residential property sales dataset and were not published for the most recent or second most recent quarters.

The series are now being published up to the current quarter due to changes in data source and alignment of the release of RPPI to the Australian National Accounts: Finance and Wealth (cat. no. 5232.0).

The complete CoreLogic RP Data unit record file (including real estate agents data) will be used to calculate the series back to March quarter 2014. There are differences in the numbers produced using the new data source compared to the previous data source. Therefore, users should apply caution when comparing data prior to March quarter 2014 with data after March quarter 2014.

Users should further note that figures published in Tables 4 and 5 will continue to be subject to revision.


FURTHER INFORMATION

An updated edition of Residential Property Price Indexes: Concepts, Sources and Methods, 2014 (cat. no. 6464.0) covering changes outlined in this feature article is planned for release by the end of 2015. The update will contain information regarding changes to the data source, the revisions methodology and the calculation of the TVDS that have been implemented in the March quarter 2015.

1 See Forthcoming Issues for future release dates. <back
2 This publication contains property sales information supplied by CoreLogic RP Data. See Appendix CoreLogic RP Data disclaimer and copyright notices. <back