As the saying goes, the Real Estate fraternity is using statistics as a drunken man uses lamp-posts — for support rather than illumination.
Australia’s unprecedented housing bubble has few fundamentals left, and this has seen the Real Estate industry turn to dodgy statistics to help sell and support the cause that one must leverage into the bubble now – before it is too late.
This has lead to warnings by the Australian Financial Review last week that misleading numbers are putting potential buyers at risk.
Mark Bayley explains record number of Auction results are going missing, leading to a big divergence between the real clearance rate which has been trending down and the reported auction clearance rate used to sell the concept that the property market is extremely strong.
More of Mark’s analysis can be found here.
The practice is by no means new. It was considered rife in Sydney & Melbourne in the years after the Global Financial Crisis (2011) corresponding with periods where markets deteriorated and property prices were falling, hence the requirement to fudge the numbers.
One has to wonder, is the same circumstances occurring now?
» Misleading property auction figures ‘put buyers at risk’ – The Australian Financial Review, 15th November 2013.
» Lies, damned lies and auction clearance rates – The Australian Financial Review, 18th November 2013.
» Sydney Agents cooking Auction Clearance Rates – Who Crashed the Economy?, 6th March 2011.
» Auction rates fudged by failed campaigns – News Limited, March 6th 2011.
Market risk, moral hazard, government distortion, geared speculation, etc., what a combination!
The storm is coming!
Have a look over here at the obfuscation tactics used by Canadian real estate agents to create their “data” – all without regulation just like in Aus….
http://www.greaterfool.ca/2013/11/03/scrubbed/
I know this has been happening for years
But I’m surprised at the numbers.
I used to work in Realestate but it’s gotten bad. No margins, hardly any pay. Only the old boys with established clients get any real money. Shit hours.
We were told to pull auctions down if we didn’t get more than 5 offers before the auction and at least 3 intentions to bid.
Usually it wasn’t be 1 in 5 that didn’t make it to auction.
That was a couple of years ago.
I spoke to my old boss and he said yer it’s struggling. They pull most auctions down 9/10 of them…
I was looking for work which was why I went to see him. Didn’t even get the chance to ask for a job.
He was saying yer those numbers have been fudged for years but now it’s just to the extreme. Most auctions don’t go up and get hidden. The rest that do make it only go up when an offer has been placed before hand because they know that’s the minimum they will get.
It’s a totally unreliable statistic. There’s zero regulation and it’s basically used to drum up interest.
If you’ve ever been to an auction any excuse will do when it comes to making people emotionally bid on a property.
@3s – Great link.
It makes me ask the question if the house price indices are “massaged” as well? As Garth Turner puts it, “In essence, it’s a mash – a hybrid of recent sales data layered over hedonic prices which tracks levels at a specific moment relative to a base period, for a specific kind of property.”
Isn’t RP Data a hedonic index which is collected and published rapidly with little to no revision as all the results come in. Are they being selective with the data as well?
I read somewhere (trying to find the link?) the spread of results for Melbourne for a quarter earlier this year. I think the REIV reported 5% growth for the quarter, RPData, Residex a couple percentage points lower, ABS close to no growth and when the Valuer-General figures came in months later with almost 100% collection of all sales, it reported a fall of something close to 5%.
It begs the second question – does anyone actually know what is happening in the market?
@Pete
>It begs the second question – does anyone actually know what is happening in the market?
No, and stop asking this kind of questions! What are you trying to do? Scare the horses?! 🙂
I’ve often thought a free app might help get the truth out about auctions (and rental properties).
Something where those turning up can enter the address and whether the property sold or not and if it went for ridiculously above reserve.
I wanted this type of app when I was last looking for a rental property. Went to a rental that was advertised at $300 or so per week and clearly it was a $380+ per week place. Had nearly 100 people there I think, including these poor uni students who think they’ve stumbled across something they can afford. We just walked out after wasting our time going there.
With the place I currently rent – I had to offer more to secure it and so a sneaky rental auction goes unreported.
Maybe this is even a crowdsourced kind of thing – try to get a bunch of people to attend a random sampling of auctions each Saturday and report back the results?
@pete – great idea to look at valuer general. median prices in melbourne city declined from 800k in 2010 to 600k today. very revealing scrolling through their pdf.
too bad i cant post the graph here as it shows near exponential rises over time, wee dip in 08-09, but now a solid downward trending line after 2010.
@pete – Is the valuer general data copyright and only available on subscription, hence you can’t post it?
If you use http://images.google.com.au and search for “Valuer General Victoria” you get some graphs for Median House, Median Unit/Apartment and Median Vacant House Block data from 1985 to 2013 for Victoria (Not Melbourne City). It looks like prices peaked in 2009 (Approx $420k) and has been falling ever since, with a more rapid decline 2012-13. Prices now look to be about $370k.
Similar graphs show Boroondara City – Straight line decline since 2009 and Maroondah City – decline since 2009 but less steep.
I think some of the Victorian Real Estate lobbyists have some explaining to do. We are already a couple years into the correction – just no one knows it.
@pete
The document i’m referring to is a long and quite detailed pdf document called:
A guide to property values 2012
You will find it at this address:
http://www.dse.vic.gov.au/property-titles-and-maps/property-information/property-prices
I think some of these graphs should be sent to mainstream media as a press release … if any would take it.
Lol is Pete just replying to himself @pete?
I think those evaluations are bull. My agents have been telling me prices went up every year. I think the valuation general person is wrong