Brokers Goldman Sachs JBWere reckon the March quarter house price index increase of 1.1% was boosted by the way the Australian Bureau of Statistics collects its information on house prices, and it missed a turndown in prices in Melbourne.

The ABS said the index of established house prices in the capital cities rose 1.1% in the March quarter, compared to market estimates of a 0.2% rise and a Goldman estimate of no increase. That compares to a revised upwards 4.1% in the December quarter (it was originally estimated at 3.2%).

That revision took the rise in the index in the year to March to a boom-like 13.8%, unchanged from the 13.8% rate (revised up from 12.3%) in the December quarter, which will be some small comfort to nervous economists.

The news won’t see the Reserve Bank’s move on rates at today’s monthly board meeting (The announcement is at 2.30 pm, Sydney time).

According to the ABS, the capital city indexes rose in Melbourne 4.1%, Brisbane 2.8%, Adelaide 2.1% and Canberra 1.0%, but fell in Sydney 1.5%, Darwin 1.3%, Hobart 0.7% and Perth 0.6%.

The ABS said that in the year to March all capital city indexes rose: Melbourne surged 25.9%, Adelaide, 21.6%, Brisbane 20.8%, Canberra 14.4%, Hobart 8.2%, Sydney 7.1%, Darwin 4.9% and Perth 0.6%. Perth’s rise is a shadow of the 30%-plus figures we saw back in 2005-06.

Were’s said the increase for the March quarter “indicated that house prices in Australia continue to inflate a rate well above inflation, rising 13.4%y-o-y compared to underlying inflation rising at a 4.2%y-o-y. At face value investment in established housing in Australia looked a wise investment in the context of the sharply negative returns posted by international equities, Australian equities and Australian listed property trusts. Although fixed interest and cash investments outperformed house prices in the March quarter, over the year to March house prices were easily the best performing asset class.”

But Goldman Sachs said the performance of the Melbourne market with a 4.1% quarter on quarter (q-o-q) rise “is at odds with the report from the Real Estate Institute of Victoria (REIV) which suggested the median house price dropped 8.4%q-o-q – the biggest quarterly drop since 1993.”

“The Real Estate Institute of Victoria uses data from a survey of real estate agents for transactions contracted in the reference quarter. That is, it has the advantage of being more timely than the ABS measure of waiting for the settlement of a property. We believe the ABS data has failed to detect the sharp change in price direction in the Melbourne market in early 2008. If we substitute the REIV numbers for Melbourne in the ABS measure then house prices fell by around 2.5%q-o-q nationally.”

If that Goldman figure was reported then the outlook for housing would be where the RBA wanted it: looking a bit shaky and trending lower, with the heat going out of activity.