Why is the HPI so important to several different markets?
There are a huge number of figures released weekly, monthly and yearly by all manner of agencies, and the housing price index is one of the most important. This goes for a wide number of markets, and is true all over the world. While property investors might be the first group of people you’d think are interested, everyone from stock brokers to forex traders will also take note when the data is released.
What Does the HPI Show?
The HPI is generally regarded as a key indicator of the overall health of the economy, which is why it’s a good measure of country by country performance. One of the primary reasons that it’s a good sign is that higher property prices tend to encourage further construction. This industry is one of the most important in instigating growth, because it generates a considerable amount of B2B trade, and creates jobs.
The index for Australia is released by the Australian Bureau of Statistics, and tracks the prices for property in the following eight cities:
- Sydney
- Melbourne
- Brisbane
- Adelaide
- Perth
- Hobart
- Darwin
- Canberra
Other countries often have a wide variety of different HPI sources. The data could come from government agencies or even property listing websites. It’s generally a good idea to check exactly what you’re looking at when you read the figures, as there’s generally no set standard.
The Relationship Between HPI and CPI
HPI data generally follows a similar trend to the CPI (Consumer Prices Index) and the RPI (Retail Prices Index), again giving an overall picture of how the economy is faring. The CPI is a good way of showing inflation, though it’s important to note that house prices won’t always follow suit.
So why is speculation important?
It’s important to look at the HPI, because this will help you decide whether it’s a good idea to start investing in property or not. An index that’s on the up shows that the market is getting healthier, which means it could be a good time to enter the market. Weak HPI means properties are losing value, likely because they’re harder to shift because there are fewer buyers. If you have a portfolio, you want to know that it’s relatively liquid.
Market traders know a lot about speculation, and the HPI is a signal that they use to decide how they’re going to trade. The main difference is that, through products like contracts for difference, they can capitalise on either direction, whereas a property investor needs a strong housing market to be successful.
To conclude, the housing price index is a very important announcement; it allows property investors to decide how to operate within their industry, but it gives the rest of the financial world an indication of the health of an economy, and the direction in which it might be moving. The Australian release happens on a seasonal basis, and it’s essential for you to keep an eye on it.