Leading providers of house price data Australian Property Monitors and Residex are waging a war of words in response to the Reserve Bank of Australia's release of two discussion papers last Wednesday.
The point of contention between the two number crunchers is whose method of calculating house price data is preferable to the RBA. APM, in its weekly newsletter, informed readers that its approach to calculating median prices had been endorsed in the RBA's reports.
Given that the RBA partially funded APM in its quest to develop the method, it's hardly surprising. Nonetheless, APM implored readers that its index wasn't in need of any further analysis by the RBA, as it was already "up and running".
APM also took a swipe at rival data provider Residex, for claiming in Wednesday's The Age that its method had "gone to another level." APM was apparently fuming over a Residex a release claiming that, of all the various methods tested by the RBA, its method was a "superior approach to the median prices generally reported in the market and press."
So what is all the fuss about?
Not a lot, really. The RBA has tested three newer statistical measures, and endorsed each of them as accurate ways of working out median prices. The major point of the RBA exercise is that these newer methods, which control for changes in the composition of sales, are superior to the simple median calculation.
Fortunately for both APM and Residex, their methods have each received the RBA's tick of approval. Consumers can be assured that no matter which provider they consult, they will obtain a more accurate figure than simple measures that do not take into account composition of sales.
In compositional median price calculations, a given region is spliced into a number of areas and a median price is calculated for each area. The median price of the entire region is the average of these area results. This method minimises the risk of 'compositional error', occurring when a large number of sales occur at each end of the price spectrum, which skews the median price.
Entitled "Australian house prices: a comparison of hedonic and repeat-sales measures" and "Measuring home price growth - using stratification to improve median-based measures," the discussion papers examine the effectiveness of using compositional measures on the accuracy of median house price indices.