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Auctions best housing market guide: RBA paper

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Auction prices are a better guide to the housing market than prices resulting from private sales, a research discussion paper from the RBA says.

The paper, by David Genesove of the Hebrew University of Jerusalem and James Hansen of the RBA's economic research department, does not represent the central bank's official view.

Even so, such papers can give some insight into the things the RBA thinks are important.

This one was based on price data from Australian Property Monitors for the Sydney and Melbourne housing markets.

And it suggests the RBA, which is known to be concerned about upward pressure on housing prices at the moment, will be watching auction prices intently - more intently than it watches prices based on private treaty sales.

Genesove and Hansen set out to find whether distinguishing between sales based on the selling method could help in both forecasting housing prices and understanding price trends.

"We find evidence to suggest that average prices of dwellings sold at auction are informative for forecasting growth in average private-treaty prices and average sales prices overall," they said.

They found that current auction prices were not as strongly correlated with prices from the immediate past, much less so than private treaty prices.

In other words, current private treaty prices are more influenced by where prices were last month, while auction prices are more influenced by which way they are going.

This result, they said, "suggests that auction prices incorporate new information more quickly than private-treaty."

In contrast, their study found no evidence that prices achieved through private sales were much help at all.

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Report finds private sales less influenced by future price expectations.

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