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Australia’s $4.3 Trillion Housing Market May Get Tradable Property Index

Investors may soon be able to wager on Australia’s A$4 trillion ($4.3 trillion) housing market without having to buy or sell homes as RP Data (RPAUMED) and Rismark International start a daily property price index and discuss ways to make it tradable with the nation’s exchange operator.

The two companies have begun computing their home value index daily, with data that takes the entire housing stock into account, RP Data, a unit of Santa Ana, California-based real estate information company CoreLogic Inc. (CLGX), said in an e-mailed release. RP Data and Rismark, a Sydney-based research group that is 53 percent owned by Macquarie Group Ltd., are in talks with ASX Ltd. on making the index tradable.

Home prices in the nation’s eight capital cities fell 4.4 percent in the 12 months to Feb. 29, following two years of growth, according to the index. Australia escaped the housing rout seen in the U.S. and U.K. after the 2008 financial crisis, leaving some investors arguing its homes are overpriced.

“The ability to obtain and optimize residential property exposure with an exchange-traded product will enable investors to efficiently manage exposure to this asset class,” Brian Goodman, product development manager at the Australian stock exchange, said in the release. “The performance of this asset class is an important indicator of Australian economic growth and the average household’s wealth accumulation.”

Entire Housing Stock

The new daily index, which is available on RP Data’s and the stock exchange’s websites, eliminates the need for revisions to figures, and represents the country’s entire housing stock, rather than just the ones that are bought or sold, according to the release.

It does so by assigning values to various components of properties, such as location, bedrooms and land size, and computing the price based on these characteristics, the companies said.

“As Australia’s most valuable asset class, accounting for around 60 percent of Australia’s major banks’ balance sheets, it is important to have the best possible measurement of housing returns and rental yields,” Tim Lawless, Brisbane-based research director at RP Data, said in the release. “The new method for calculating capital movements provides a significant step forward in understanding housing market conditions across Australia.”

The daily updates will cover dwelling prices for Australia’s five biggest capital cities, RP Data said. It will also track rental markets by estimating rental income and yields using a similar methodology to the values, the companies said.

RP Data and Rismark will continue to provide end-of-month figures, which break down prices into houses and apartments, and will cover all capital cities and the Gold Coast in Queensland. The data will be released on the first working day of each month, they said.

To contact the reporter on this story: Nichola Saminather in Sydney at nsaminather1@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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