Reliable house price models aid to government policy determination

Last week the ABS released its capital city house prices models for the June quarter. The highlight of the report was the extraordinary result for the Sydney market.

The ABS established house price index for Sydney increased by a remarkable 9.8 per cent over the quarter – the highest quarterly rate of growth ever reported for Sydney by the ABS.

Although there was a significant disparity between various published house price models for Sydney for the June quarter, the ABS results again validated those published by the Domain Group in their recently published report.

Domain reported that Sydney house prices increased by 8.4 per cent over the June quarter – similar to the ABS and the also the highest quarterly result ever recorded for Sydney by the Domain series. 

Although these results were unprecedented for Sydney they were nonetheless a logical outcome given the Domain Group had recorded weekend Sydney auction clearance rates over May at an also unprecedented 90 per cent.

Record level prices growth was always a likely result of these extraordinary auction results and validates the reliability of Domain weekend auction reports as a forward indicator of general housing market activity.

Robust and reliable house price modelling is important for decision making by home buyers and sellers with Domain now providing Home Price Guide as a valuable tool for this purpose.

Robust and reliable house price models are also important as a mechanism for government policy determination – particularly for interest rate settings as determined by the Reserve Bank.

Dr Andrew Wilson is Domain Group Senior Economist
Twitter: @DocAndrewWilson