“Lies, damn lies and Statistics”
3 Blind Men & The Elephant
Have you heard of the parable of the 3 blind men and the elephant? Like the blind men in the parable, property experts often disagree amongst themselves because they might be looking at different data sets or different property market segments. For example, when an industry expert is trotted out by the media to give a “sound bite” aka opinion on the direction of the property market, they are often constrained by time. Which property market are they talking about?
There simply isn’t space or time to list down all their underlying assumptions or even which market segment they are talking about.
Some industry experts have been quoted by online and print media that “property can perhaps be a hedge against inflation”, citing statistical correlations between the inflation rate and the annual data series of residential real estate returns. See the Sun article, “Does residential property hedge against inflation?”
But 🤠 thinks it’s a bit more complicated than that. Statistical analysis by a candidate for a PhD at USM at Penang finds it is true for detached houses over the long run, and terrace houses in the short run and not true for other types of properties, see “House Prices in Malaysia: Demand, Supply and Inflation Hedging Ability” by Dr Yeap Geok Ping, 2018. For more information, see my blog post at 360 KLCC “Does residential property hedge against inflation?”.
Post Script & Disclaimer
1. I am an alumni of the School of Business, University of Bradford where I took Statistics 101 & 201 in my MBA class. The School of Business at Bradford was ranked Best Business School 2021 by the UK publication Times Higher Education
2.I own a statistical forecasting software, Forecast Pro.
3.As an ex investment analyst, I am familiar with correlation analysis and Box Jenkins ARIMA statistical forecasting models. I have reviewed a book “The Secret Atlas of Greater KL” and noted the limitations of using the median when correlating property price and rental premiums to proximity effects, eg to parks & greenery.
4.The source of the quote about Statistics is much debated. See Wikipedia’s entry here
