Unlocking the value of robust research.
Statistics are often criticised for being misleading, but they are just a summary of facts that have been gathered and collated. The issue of credibility only really arises when we interpret them and put our own spin on them. If they were left in a raw state, then they would remain the truth.
The classic example of spin and misleading conclusions are those related to the property market, in particular housing. Valuers (and indeed all of us) need to be wary of poor interpretations and misunderstandings. Valuers are trained to deal only in verifiable facts.
A valuation is an opinion - albeit an expert one - and opinions are only as good as the facts they are based upon. Research produces facts and some research is of poor credibility, while other research is robust and able to withstand rigorous scrutiny. It is the latter that valuers use in providing their opinion of value.
It takes a questioning mind to assess which research, or which set of statistics, is useful in terms of quality. Poor research that is not scrutinised can lead to poor decision making.
Currently, statements are being made about the population growth in Auckland City. This is a prime example of research that is not good quality being relied upon. Decisions on land development in Auckland and the need for more houses, are being based on Statistics New Zealand estimates. Note the word estimates. The estimates are not as robust as the census.
Let’s look at the historic accuracy of these Statistics New Zealand’s estimates. On 30 June 2012, they estimated Auckland’s population to be 1,507,600. Yet the census on 31 March 2013, showed the population was only 1,415,550. This is a difference of 92,050. 92,050 people represents 23,000 houses, if it is assumed an average of four people per house. Auckland’s population grew by an average of 16,500 between censuses 2005 to 2013.
Similarly, today Statistics New Zealand is estimating an increase of 30,000 people per annum in 2016, and new houses and developments are being planned accordingly. What will the rear view mirror of the 2018 census show us?
Therefore, the prudent approach to the Auckland housing crisis would be to drill more deeply to find out what is really happening. That way, we’d be fully informed on the risks that could eventuate in an oversupply of sites. Do you agree?