ABS responds to "ABS underestimated Sydney's decline" (AFR 9 August 2005)

Sir

Tina Perinotto's article "ABS underestimated Sydney's decline" (AFR, 9 August 2005) inferred that the ABS is incorrectly measuring changes in house prices. This is because of differences between the ABS house price index and a new house price index compiled by Australian Property Monitors (APM).

Measuring the change in house prices is a very difficult task because it is generally not possible to observe the price changes for the same houses from one period to the next. Therefore, various techniques are used to try to ensure that the impact of changes in the composition and quality of the houses sold is minimised. The technique used by APM of grouping houses by location within a city is also used by the ABS in its house price index.

Differences in methods and sources will result in different measures of price change. It is not possible to identify any one series as being the "correct" measure, although the APM index is currently more timely than the ABS's. The ABS is in the process of improving its house price index and it is expected that improvements will be introduced when the September quarter 2005 index is published later this year.

Peter Harper
Deputy Australian Statistician
Australian Bureau of Statistics