Background to the Development of the RP Data-Rismark Indices

Historically, there has been a great deal of public criticism from economists, commentators, regulators and policymakers about the integrity of the existing sources of property price performance. Ian Macfarlane, the former Governor of the Reserve Bank of Australia, has himself said:

"Housing...is an extremely important asset class for most people, yet the information we have on prices is hopeless compared with the information we have on share prices, bond prices, and foreign exchange rates…It really is probably the weakest link in all the price data in the country so I think it is something that I would like to see resources put into."

The focus of the criticisms on the existing property indices have ranged from issues associated with:

1. The timeliness and representativeness of data used by public indices (eg, using settlement data that is in fact three to six months old, or only capturing data from, say, the loans issued by major lenders);

2. So called compositional biases brought about by changes in the sample of the properties that have been sold (eg, either more apartments trading in one quarter versus the next, or more Melbourne homes selling versus Sydney or Brisbane properties); and

3. Methodological concerns relating to the crude and/or biased nature of the techniques that have been used to construct existing indices (eg, the noise or volatility associated with simple median price series, or the fact that "repeat-sales" indices only use a limited amount of the available data).

In developing the new stable of RP Data-Rismark Indices, RP Data and Rismark have sought to address these deficiencies by drawing on the most advanced index construction methodologies available anywhere in the world.

*Rismark is a global real estate funds management business that specialises in investments, quantitative research, property price index construction, funding, securitisation, and the development of automated valuation models. Rismark’s management team has extensive experience in quantitative residential real estate research and is augmented by a Global Research Advisory Board comprising of eminent academics from Australia and overseas.