Callam Pickering of Business Spectator today builds on Leith’s work yesterday deconstructing the HIA/CBA Housing Affordability Index (BTW, we like your stuff, Callam, but a friendly reminder that you should link other people’s ideas).
Well, the improvement in affordability is mostly due to a fairly dubious measure of house prices…It is a simple median measure…which means that it does not take into account changes in the mix of size, location or quality of the dwellings financed.
…A good dwelling price measure will try to compare like-for-like. The RP Data measure, for example, uses a hedonic modelling technique based on a range of variables (such as location, number of bedrooms etc) to control for changes in the type of dwellings sold each month.
The Commonwealth Bank measure does no such thing.
