Is Australian property sales data reliable and accurate? Find out?

[Jacque]

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RP Data is certainly performing well in the current economic climate. See the Business Spectator story here RP Data profit up 18.8% http://www.businessspectator.com.au/bs.nsf/Article/RP-Data-profit-up-188-326D3?opendocument&src=rss

RP Data http://www.rpdata.net.au/ is a private profit driven commercial organisation. It will act in the best interests of shareholders. Not in the consumers or the publics best interest.

With so much emphasis now placed on understanding Australian household debt and the financial health of consumers it is critical that accurate and reliable property price data is available.

There are unanswered questions about the integrity of the sales data, services and products provided by RP Data.

Firstly there is no openness or transparency about the accuracy or reliability of data sourced, data stored, data managed and data reports.

There are no public statements about the level of accuracy or level of completeness of data reports. So why trust or rely on RP Data?

Why has one company, RP Data got a monopoly on data provision to Australian industry and Australian government?


Of central importance

Is the national housing "dwelling value to loan value ratio". This is the national housing spreadsheet. It reflects the financial stability and wealth of the nation's households.

There should be correct and accurate data available for both sides of the equation.

1. Correct and accurate data for dwelling & housing values suburb by suburb
2. Correct and accurate data for loan values compared to the dwelling values suburb by suburb.

After all if you cannot measure it accurately you cannot manage it accurately.


The benefits of accurate data.

1. Government could then understand much better where the vulnerable suburbs, postcodes and LGA's are in terms of high LVR's, high DSR's and high debt. Target these areas with financial education, information services and support. e.g. encourage responsible financial management and inform the consumer about their rights and responsibilities.
2. Improve consumer protection and education at a grass roots local level.
3. Gov could then monitor, measure, forecast and plan better for the future with correct, accurate and reliable housing data.
4. Gov could develop a proactive process and not react to the market. This could be a good investment for the future of our children, grandchildren and generations to come.


In terms of measuring and monitoring LVR's, DSR's and personal debt levels that is a subject better covered in another post. I have a few ideas.

Anyway let’s look at the issue of accurate, complete and reliable residential housing data. One side of the equation.


RP Data customers

Based on my experience the core customers for RP Data http://www.rpdata.net.au/ are real estate professionals. See

•Residential Real Estate Agent
•Commercial Real Estate Agent
•Valuer
•Mortgage Broker
•Property Developer

AND Corporate and Government

•Banking & Financial Institutions
•Insurance
•Government
•Corporate

The My RP Data http://www.myrp.com.au/ service for buyers and sellers is not core business. Notice the amateur Adsense Google Ads on the webpage?

The most relevant product for property investors is the comparative market analysis, comparative sales data analysis or valuation. When you buy a property or have it valued you need comparative sales data and compare apples with apples sales data.

The other products e.g. http://www.myrp.com.au/showAllProduct.do are glossy and look good but not much value and notice the Google Ads are for property developers and mortgage brokers etc. Core business. Not that they would have much control over which ads are displayed because Google will determine relevancy and rotate the ads.

The property research page offers lead generation products like the free suburb report etc.

Notice the Find an Agent page http://www.myrp.com.au/findAgent.do . This is promoting core business

Notice the Agent Blog page http://www.myrp.com.au/agentBlogs.do which promotes the core business.

Of note RP Data also offers NZ Reports, USA Reports and China Info. How accurate and reliable is this data?

Without a doubt RP Data has stepped up and big returns are begging. The promise of big returns can create bias and manipulation.


Accountability for Data reliability, dependability and validity..

RP Data sales data is sourced from Valuer Generals in each state and from submissions by Real Estate Agents. Yes data input from Real Estate Agents see http://www.rpdata.com/property_indices/property_indices.html

And the comment " “..the way in which the real-time data is collected, via real estate agents (over and above the traditional valuer-general and land titles sources), has the potential to solve many of the timeliness problems that has plagued measurement in this area.” "

Questions
1. What are the standards for data input by real estate agents and RP Data staff?
2. Are these Australian Standards?
3. Is RP Data a Quality Endorsed company?
4. Does RP Data hold 100% all sales data for all states? Not that I have been informed about. I have been informed it could be as low as 60% to 70%.
5. What % of the data is input by real estate agents 5%, 10%, 15% or 30%?
6. Why is the status of sales data reliability not published by RP Data?


Audits of data

1. Who audits the integrity of the sales data and how often?

The RP Data-Rismark Indices have been independently audited by the Securities Industry Research Centre of Asia-Pacific ("SIRCA"), http://www.sirca.org.au/
see http://www.rpdata.com/property_indices/property_indices.html

1. Where are the audit results?
2. When was the last audit conducted?
3. How often are audits conducted?
4. What are the audit terms and conditions?

Disclaimer for data

See the disclaimer http://www.myrp.com.au/disclaimer.do and
" Whilst every effort is made to ensure that the information indicated for each report is available, RP Data does not guarantee that all of the information for its reports will be available at the time of purchase. " and " The information provided is deemed reliable but not guaranteed " and " In compiling this publication, RP Data has relied upon information supplied by a number of external sources. ... RP Data does not warrant its accuracy or completeness "

Questions:

1. What is the level of accuracy? 10%, 30% or 80%
2. What is the level of completeness? What are sample sizes, how much sales data and other questions?
3. Why trust and rely on the data?


Valuer Generals Office in each State
RP Data sources data from each state Government in Australian

see details her RP Data Terms and Conditions http://www.myrp.com.au/terms.do

Where the readers aware that the Valuer Generals office in each state often publish residential sales data in weekend news papers annually or bi-annually. The qualifications and explanation for supply of data analysis is clearly described with each published report from the Valuer General.

Does RP Data employ the same standards. Yes or No?

For example

When considering suburb median price statistics e.g. check out the RP Data Suburb Profile http://www.myrp.com.au/showProductDetail.do?reportTypeId=1&propertyId=


The Valuer General Valuation Services would state the following and does RP Data manage their data in the same way? Yes or No?

1. Where data volumes used in analyses are small, calculations can result in misleading results.
2. Outliers have also been excluded where results are considered misleading. For example in cases where there are fewer than 15 house, 10 unit or 10 land sales in a particular suburb, the median sale price and percentage change have generally not been included in the analysis of that suburb because the sales volume is low.
3. Sales data has been adjusted where possible to exclude multi-lot transfers and property transfers that are not considered to be at arm’s length.
4. Properties with a land area of more than 2.1ha have been excluded from this analysis.
5. Sales of larger land areas are more likely to include or reflect uses other than residential. Where possible sales of property with land areas that are not considered to be typical for that locality have been removed from the analysis to ensure the results more accurately reflect value and change.
6. Where possible smaller sites that do not represent a residential use have been excluded. It is recommended that any significant variances in land area should be considered when viewing the analysis and comparing districts.
7. What are the definitions for major property types and are variances excluded e.g. house and shop and house and market garden removed from house sales data?
8. An issue results from the sales of land that included building contracts. Details of new buildings with land sold " off the plan" are not made available as they appear to be vacant land sales.


Questions:
1. What are the RP Data qualifications for the supply of data analysis?
2. What are the standards employed?
3. What are sample sizes for each product?
4. How are reliability, dependability and validity measured?
5. Is rental data information sourced from advertisements for properties for rent? Or actual residential property leases? The answers I have received in the past from RP Data are that rental data is from adverts. So the level of accuracy is low.


Check out part two of this post below

[Jacque]

This is part two


RP Data Rismark Home Value Index
See http://www.rpdata.com/property_indices/property_indices.html


RP Data states " RP Data and Rismark International ("Rismark") http://www.rismark.com.au/ have a highly accurate and timely suite of world-class property price indices that have transformed the way Australians measure and understand changes in the value of residential real estate over time. "

1. When was the high level of accuracy proven?
2. Who proved this accuracy?
3. Is RP Data accountable to its shareholders? Yes
4. Or accountable to the consumer and the public? No
5. If RP Data is a commercial profit driven company could its operation be open to profit driven bias.
6. Is RP Data accountable to Federal Government or State Government data standards?


"Special customised versions of the RP Data-Rismark Indices are also available. These are made up of property sales data relating to the latest possible month, thereby avoiding the 6 to 8 week reporting lags that have previously plagued other published indices."

1. These indices will rely on real estate agent data input. What will the data input standards be? Will data be input after the sales contract becomes unconditional or at settlement?
2. Real Estate Agents may be tempted to overstate sale prices to talk up the market? This would be human nature if there is limited accountability or no penalty for any inaccuracy.
3. And many other questions regarding quality.


" In addition to the SIRCA audit, Moody’s Economy.com http://www.economy.com/default.asp , which is a leading global economics research organisation, has also undertaken an extensive review of the methodology, data and procedures used by RP Data-Rismark to construct house price indices."


1. What is stopping RP Data employees or Moody's employees from insider trading and other activity? See recent news report " Former Moody's employee charged with insider trading " http://www.smh.com.au/business/former-moodys-employee-charged-with-insider-trading-20100216-o849.html
2. How objective and unbiased is Moody's Investors Services? See the news report " Rating a culture of Moody's manipulation " A newspaper investigation has found that Moody's punished executives who questioned why the company was risking its reputation by putting its profits ahead of providing trustworthy ratings for investment offerings. It also stacked its compliance department with the people who awarded the highest ratings to pools of mortgages that soon were downgraded to junk. http://www.theaustralian.com.au/business/news/rating-a-culture-of-moodys-manipulation/story-e6frg90f-1225788542991
3. Money talks and could Moody's Executives be in bed with RP Data?
4. With RP Data expanding services into NZ Reports, USA Reports and China Info this is big business and data quality is open to bias and manipulation. Could that ever happen?


" The Moody’s report’s summary findings, which were authored by two economics PhDs, "

1. Who were the authors?
2. What are their specialisation?
3. Why aren't the report details open and transparent?
4. When were the findings authored? 1990, 2000 or 2010?
5. Where were the findings authored? Outer Mongolia or Kazakhstan?


RP Data - Data
See http://www.rpdata.com/about_us/our_data.html

" Our innovative analysis and reporting tools are used by numerous industry bodies while government authorities use our very own indices in forecasting and policy making."

1. Given all of the questions above should government authorities be using this data for forecasting and policy making?
2. If the data is inaccurate, incomplete and unreliable this could affect the Australian consumer?
3. Why does RP Data have so much influence and so little accountability?



Valuations, banking and financial institutions
see http://www.rpdata.com/general/banking_and_financial_institutions.html

" In response to the GFC there is opportunity for players to make significant improvements in their business which can address cost efficiency and revenue improvement dimensions. " Because the valuers often over valued property..

As a side issue the Valuation industry is not regulated Federally and industry standards vary state by state. A good subject for another post.



Further analysis

Time permitting readers could methodically review each webpage at http://www.rpdata.com/index.html and http://www.myrp.com.au/index.do and

generate questions to ask of RP Data and make RP Data more accountable like:

1. Why is RP Data relied upon by Government as the sole provider of this information? It is a private commercial organisation with vested interests and commercial bias. It is accountable to shareholders.
2. Does RP Data have a monopoly in this market place?
3. Is the RP Data position of influence anti competitive and therefore illegal?
4. Inaccurate data reports could be misleading and deceptive and talk up the market when it may not be the case. It would be in RP Data’s best interest to talk up the market.
5. Why isn’t the RP Data methodology more open and transparent
6. what if some of the RP data is just plain bull**** and Gov, industry and home owners are relying on it?
7. What if RP Data ever went bust and belly up and this so called invaluable industry data was no longer available? Would that make State Gov and Federal Gov agencies vulnerable in terms of statistical data availability? Could this leave a big hole and affect Gov forecasting and policy development and hence affect the Australian consumer?
8. Why should Gov be so reliant on a private commercial organisation for such important information. Is that an unhealthy business relationship open to manipulation as RP Data is not subject to Federal Gov or State Gov public sector standards?
9. What quality standards, service standards, data standards and business standards is RP Data subject to? I believe RP Data is accountable to their shareholders.
10. What checks, balances and accountabilities are in place?
11. Should RP Data be subject to a Financial Services License?
12. Should there be special licensing for sales data providers?
13. Should there be industry standards for property sales data provision?
14. What are the corporate penalties if RP Data gets it wrong and the data is inaccurate, unreliable and not complete?
15. Shouldn't state governments and the federal government cooperate, collaborate and share sales data with the Australian Bureau of Statistics (ABS )or Reserve Bank of Australia (RBA). To be the central source of residential sales date versus a private commercial company with vested interests. To create greater openness, transparency and accountability. There could be clear public sector standards, audits, checks and balances put in place.
16. any other questions you can think of??



What can consumers do about this?

1. Ask your local area Federal Gov politician or State Gov politician about the Governments use of RP Data? The contact lists can be found online.
2. Question the accuracy and reliability of the data.
3. Contact Fed Gov and State Gov customers e.g. Department of Housing, Planning, Development etc and question the integrity of the data
4. Contact ASIC and ask the same questions? And specifically what accountability does RP Data have to provide accurate, complete and reliable data?
5. Conduct a media campaign asking RP Data these questions above. Media contact lists can easily be found online and e-mails sent easily to all media outlets Australia wide and internationally


By thinking in the medium to long term, by considering the future of our children and grandchildren

1. What questions can readers think of?
2. What strategies can readers think of?

[jenny.smith]

The most relevant product for real estate investors is the market analysis, comparative analysis of sales data or evaluation. When you buy a property or have a value you need comparative data on sales and compare apples to apples data sales.

[james720]

In terms of measuring and monitoring LVR's, DSR's and personal debt levels that is a subject better covered in another post. I have a few ideas.