ANZ Bank is using Google Trends to predict the direction of Australian house prices

(Alan Crowhurst / Getty Images)
  • ANZ economists have compiled a Housing Index based on statistical analysis of Google Trends data.
  • The latest results from the Index hints that house prices may stabilise later in the year.
  • ANZ said the Index can be used as an “additional tool” to forecast the direction of house prices.

With Australia’s housing market downturn now well underway, more analysts are turning their attention to where prices are headed next.

ANZ economists David Plank and Giulia Lavinia Specchia have introduced the Housing Search Index, which is based on data compiled from Google Trends.

The pair said there’s now “significant research” which suggests aggregated Google searches provide an accurate gauge of sentiment in a given market, such as housing.

So what are the results from the standardised index? Well, it’s not all bad news.

“The ANZ Housing Search Index has been slowing throughout 2018 but more recently ticked higher — suggesting a jump in interest in house buying and hinting that near-term stabilisation in housing prices may be on the cards,” Plank and Specchia said.

ANZ Bank

The above chart shows the Housing Index tracks house prices pretty consistently, “with the added benefit of a three-month lead”.

To compile the data, the analysts investigated Google Trends data from as far back as 2004. They covered a range of searches related to buying a property, including “stamp duties”, “auctions today” and “moving company”.

Then they standardise the results and seasonally adjust the data. Because the underlying time series is quite volatile, the analysts use trend data to filter out excessive fluctuations.

While there are a number of indicators which analysts use for housing market forecasts, Plank and Specchia said the Housing Index can be a “useful gauge” for house prices.

In that sense, they said it should be used in addition to other leading indicators such as credit growth and auction clearance rates.

In June this year, ANZ said the Australian property downturn would be larger than previously thought, with auction clearance rates at multi-year lows and credit growth slowing — particularly to housing investors.

And last week, AMP Capital said prices in Sydney and Melbourne are still likely to fall by another 10-12% over the next couple of years.

Data released from the ABS yesterday showed the slowdown in lending to housing investors is still very much evident. But Plank and Specchia said recent trends in auction clearance rates provide a glimmer of hope for the near-term outlook.

“The very recent stabilisation of the auction clearance rate is consistent with our search indicator,” they said.

“In both cases, the sign of improvement is at a very early stage so we are cautious about over-interpretation. Still, these are encouraging early signs.”

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