IN THE PROPERTY MARKET MAKING SENSE OF STATISTICS IS VITAL BUT TAKEN IN ISOLATION, SOME STATISTICS CAN BE DOWNRIGHT CONFUSING. THERE ARE A FEW QUESTIONS TO ASK YOURSELF WHEN TRYING TO MAKE SENSE OF WHAT THE COMMENTATORS ARE SAYING.
The first is the time period the data refers to; some data can be up to six months old when it is released and the market could have changed substantially since that time.
The second question to ask is “when-to-when” the comparison is being made. For example, is it a fall from last month (or last quarter) or a year-on-year comparison (ie April this year compared to April last year)? The third question is “what” is being measured; is it for houses, or “non houses” such as apartments, units, townhouses etc. Is it just the private sector or all data?
The fourth question is whether it is “original”, “seasonally adjusted” or “trend” data. Each serves a different purpose. Original data is what happened over that period. When you look at original data you need to be aware that some months are traditionally slower than other months, which can create a false impression of what a rise or fall means. A year-on-year comparison is quite important when considering original data. To assist with this, the ABS provides a “seasonally adjusted” figure which takes regard of the normal market cycle. You could have a downward result for the original data and an upswing on the seasonally adjusted and be perfectly correct. The ABS also provides trend data which shows the longer term movement in the market by removing the short term volatility.
To demonstrate how this works in last week’s ABS Building Approvals the total number of building approvals in Western Australia fell 6.8% in the month, which could be regarded as statistically significant however, it is up 2% on the same time last year. On a seasonally adjusted basis, approvals rose 4.4% over the month and 13% year-on-year. The trend data tells us that approvals are up 0.2 per cent over the month and up 17% year-on-year.
In 2013 we had the highest number of dwelling approvals on record in Western Australia, 4.3% above the previous record of 26,971 in 2006. In the first four months of 2014 we are 19.1% ahead of the dwelling approvals for the same period in 2013 (original data). However if you just look at the 10.2% fall in March, which was followed by the 6.8% fall in April, the picture looks entirely different.