Sydney market’s frenzied day 1 response

This is very interesting.

Core logic daily index jumped 48 percent points based on just Sunday (yesterday) data. This is largest movement I have ever seen in one day and could indicate big jumps coming in next few days.

In simpler words, sale contracts written in Sydney yesterday had a frenzied response which saw average sale prices jump almost half a percent across entire Sydney in just one day which is quite phenomenal.

Labor win was already priced in and market should rush back to a higher level within days at a new higher value now that negative gearing and CGT tax threats are gone. It will be interesting to see how much of an impact still remains due to lending restrictions.

 

There are always frenzied responses on sentiment but market equalize. People might have been cautious because of the election but if anything, I think a frenzied response will actually be more subdued as now there is no deadline - perceived or otherwise - on the end of NG so there is now no rush to buy for anyone who was thinking of getting in before the change.

I received multiple emails over the last few weeks from potential investors wanting to buy prior to any changes who effectively had a deadline of January 1st. Now that's disappeared there is no rush so those who would usually procrastinate on a purchase can go back to doing so.

- Andrew

 

are you serious?

when I reviewed CL index today and noticed that jump the first thought that I had was that you were going to create a topic about that and I was right

IMO, that's just some data glitch... it happens from time to time. E.g. on 22/12/2018 the index suddenly moved 42 points down. One day before / after it was normal. Another example: 19/01/2018 : 45 points down

 

Hahaha .. what you should be saying is that whether corelogic are serious in creating a daily index? Believe it or not it theoretically does reflect the state of the market.

22/12/2018 - 14 points down
19/01/2019 - 7 points down

I am using the file on Core logic website.

To be fair market did drop in bigger chunks in December/January and those 2-3 months were precisely when it got hit the hardest.

A 48 percent point hike is not a glitch - it correlates with 5-6% increase in bank shares in first few hours of trading. Surely that's not a glitch either.

I agree we can't read too much into the extent of recovery from this but Sydney surely has bottomed out and there were signs that it was heading towards a bottom even before the election.

 

Forget corelogic daily index, as always the true indication of future market movement and sentiment is the smart money, i.e equity markets. Have a look at bank shares today..

 

Lol I love the enthusiasm @standtall - I doubt this specific data point is related to the election.

The data flow through isn't that timely. Nonetheless, for those on the ground in some parts (more premium) of Sydney, the markets no longer falling, probably for a little while now. Big price drops happened, very little stock has brought the equilibrium back in prices in these markets. The data is already starting to show this and will likely continue over time. Other parts (outer west), are probably still adjusting (Sydney is a big place!).

 

But are we talking where credit is or isn't an issue?

The major issue is still getting the finance. Hence markets with potential cash buyers haven't been affected.

 

Try not to provide emotionally provocative interpretations on daily indices. Media do this with share markets a lot. Their analysis of causation at this granularity is usually rubbish.

 

That jump is a cracker timing wise. But its really not that unusual. I've seen quite a few 40 or 50+ movements up or down. Redom's right, it's not the election. The index doesn't work that way, and it also doesn't account for bank shares.

Big movements like that (based on this index method) are almost always caused by large outlying sales like whole blocks of flats or big multi-million dollar luxury places, because the index finds its level based on recent sales. When you see huge jumps it isn't a glitch but it's an anomaly. It's not a negative, don't get me wrong, but it's tied more to the general seasonal improvement we've been seeing.

It's also not meant to mean much on a day to day basis. It doesn't work like the stock market. If it starts rising 5-10 points a day, maybe that'll indicate the election helped, but this doesn't.

 

I would urge you to read about corelogic daily index methodology on their website before forming an extreme opinion.

 

Care to provide dates where it happened? For your reference, historical data is available to download on their website?

 

You have just manufactured an explanation here which is far from reality. Bulk sales or outlier sales don’t cause fluctuations on daily index.

Here is a link to the methodology: https://www.corelogic.com.au/sites/default/files/2018-01/Residential-Property-Index-Series.pdf

 

Hedonic indexes are skewed by unusually large sales. It's one of the biggest flaws of this kind of index. We can get excited but let's be a just a little bit realistic. I'm not even suggesting there isn't going to be a turnaround in the market, but the index doesn't work this way. Yes, I have read and understood the methodology.

 

The clue is in the name. Yes, it is supposed to be granular to a day.

https://www.corelogic.com.au/sites/default/files/2018-01/Residential-Property-Index-Series.pdf

 

Yes they do. The index imputes values based on sales of like properties. It literally says this in the methodology. This means if you sell a high value property, the index imputes higher values for other properties in the suburb.

 

Fortunately it’s not as simplistic as you are assuming it to be ..

Let’s say a luxury 6 bedroom property sells on a particular day in a suburb. Core logic already has a valuation on that property based on historical data and the sale price will impact the valuation of similar properties only.

It’s a not just taking an average of sales across the suburb..

Their daily indices aren’t perfect but you first need to learn how they actually work before inventing a critique.

 

I've formed no opinion. Merely commenting on your readiness to make a causal inference to the election and the emotive language you use to describe it. Tbh I'm not even sure you meant to reply to me, because your response was a non sequitur

 

how do they get their data how do they know that the contracts were written that day? In New South Wales are contracts lodged with the government before settlement?

 

Never trust what a computer says is my philosophy; especially when it comes to money. Ground reality is almost always different. onthehouse is one of those anomoly by CoreLogic.

 

Standtall you are just flat out wrong, sorry. This data does not have anything to do with the election. It just doesn't.

Their methodological papers clearly state the algorithm takes sales up to 360 days old. The index also calculates at a minimum of 30 days. This data spike is just that. A data spike.

They also use settled transactions as part of their algorithm, which should make sense (I mean how could they possibly compile contracts accurately from a weekend ago? It just cannot work that way, it isn't physically possible).

The daily update calculates using that data and a range of other attributes of properties like their size, location, amenities etc. It says in the methodology they use transactions up to 12 months old, and that off the plan sales are specifically excluded because they fall outside this timeframe.

It is released daily yes, but it calculates using an algorithm, which is why looking at it daily is not a good idea. The trend is pretty close to other index methods but it tells you literally nothing day to day. Like with all data the trend is what's important.

Their methodology also specifically says this:

Capital works factors significantly into
the overall change in the property
market – as properties constantly
evolve and in particular, new properties
are introduced to the market, there is
often a premium paid for the generally
higher quality of the new stock that
does not accurately reflect the organic
growth attributed to existing stock.
For example, when large unit
developments hit the market all at
the same time, the spike in volumes
combined with the low turnover rate
can result in average prices being
skewed towards the new builds, which
may exaggerate the perceived growth
of property prices.

Which supports what I was saying regarding how large data movements are usually down to large tower block sales or unusually high value transactions, especially in low volume markets (which is why we tend to only see these 40+ movements in either the middle of summer or coming into winter wen volumes are very low).

The data just doesn't have anything to do with the election. There is no argument.