*Google search beats housing economists

Researchers at the Bank of England have a little too much time on their hands of late.

Short of things to do, two research analysts working for the bank decided to compare the effacy of using keyword data from Google Insights (a free tool allowing access to keyword and search information) with data from UK house price indices, in predicting movements in future house prices and transaction volumes.

After analysing a large number of keywords, the analysts found that the term “estate agents” was the most predictive and had a stronger correlation with future UK property prices and transaction volumes than two leading house indicies, including the much quoted RICS survey.

The researchers put the accuracy down to Google’s large sample size in comparison to the pool used by the economists compiling the house price surveys.

Comment

The findings raise some important questions. The most important is the accuracy and usefulness of UK house price surveys.

The main objective of most of the surveys is to create PR and editorial column inches rather than inform consumers or the trade which results is an overload of confusing and often contradictory information.

There is a strong case for consolidation. Only those with the largest sample sizes should be regarded as legitimate. This is the Land Registry for sold prices and Rightmove for asking prices. There is an interesting discussion on these issues here.

The second interesting question is why the term “estate agents” should be most predictive? Why is more predictive than “property” or brand names such as “Rightmove”?

Perhaps buyers (as well as potential sellers) search for “estate agents” when they become “serious” as they believe they should be registered with local agents to get the best deal.

This could be an interesting online marketing insight.

On the other hand, the Bank of England researchers are only reporting on correlation, not causation and there is no way of knowing how manipulated the data on Google Insights is.

Source: Global edge

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