Media | Land Matters

The Missing Slide

16. May 2014 · 70 comments · Categories: Finance & Money, Land Reform, Media, Uncategorized, Who Owns Scotland

The image above (click for larger version) shows the missing slide from the presentation on the Economic Contribution of Estates referred to in the Means and Medians blog from last week. (1) It is important because it shows the significant difference between the mean and the median. (2)

In particular it is important because the researchers who wrote the report stressed that in such a skewed sample, the mean should not be used.

It should, however, be stressed that the overall average values are very heavily influenced by the large and very large estates and the median figures for average income and investment are significantly lower.” (4.2.2 pg. 39)

In presenting the findings, the lead researcher, Rob Hindle stated that,

”the mean average [is] significantly skewed by the bigger numbers at one end of the spectrum – so don’t do it – it’s not helpful. You need to start looking for the middle point but be aware even so that the middle point ..there are very big differences between the numbers at one end and the numbers at the other end so the middle point is again to be treated with caution”

The means and medians are not published in the report for these very reasons. However, SLE issued a press release on 16 April entitled “New Research Reveals Significant Annual investment on Tenanted Land and Crofts by Estates” with an opening line that read,

“Rural estate owners are investing an average of £69,000 per year on their tenanted farms and crofts“, new research has revealed.

The release went on to state that average income amounted to £101,422.

The more accurate figures are the medians and, as the graph shows (second set of columns from the left), the difference is startling.

Median revenue is around £22,000 (22% of the mean) and expenditure about £10,000 (14% of the mean) compared with £101,422 mean revenue and £69,145 mean expenditure

The differences for other categories – notably heritage and leisure are even more pronounced.

NOTES

(1) I should emphasise that the report is an excellent report and I plan to blog at greater length on its findings.

(2) The mean of a sample is the total of all the values divided by the number of values. The median is the middle value in a distribution of values. So, for example in a town with 100 houses where 99 were worth £100 each and one was worth £1 million, the mean would be £10,099 (1,009,900 divided by 100). But describing the average house price in town as being £10,999 is obviously misleading. In a skewed distribution, the median is more useful and in this case is £100 (the middle value when all values are lined up from smallest to largest) – in this case a far better representation of the average or typical price of a house.

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Means and Medians

09. May 2014 · 39 comments · Categories: Finance & Money, Land Reform, Media, Who Owns Scotland

Two weeks ago, on 23 April 2014, Scottish Land and Estates (the body that represents some of Scotland’s landowners) held its Spring conference at which it published a report on the economic contribution of estates in Scotland. (1) A week before that, on 16 April, it issued a Press Release headlined “New Research Reveals Significant Annual Investment on Tenanted Farms and Crofts by Estates”

It included the results from 143 estates surveyed that were involved in renting land for farming and stated that these had, on average, 11 tenants per estate covering, on average, 221 hectares. Total annual expenditure on agricultural and crofting tenancies amounted to £10.8 million, primarily on repairs and capital costs, equating to £26.58 per hectare and an average total annual expenditure per estate of £69,145. Average income amounted to £101,422.

Douglas McAdam, the Chief Executive of SLE said that,

“The figures clearly demonstrate that there is significant investment by estates and our members are willing to invest further if we can create a stable climate that encourages investment. These are averages and investment does of course vary …. However, we are being told by members who do invest substantially that their continuing commitment is being jeopardised by the re-emergence of a potential absolute right to buy for tenants.”

It was clear that SLE wished to emphasise a) how much estates were investing and b) that possible land reform would jeopardise this in the future.

Fair comment.

So it was with some interest that when I came to read the relevant section of the Economic Assessment report (4.2.2 pg. 39) and saw these figures, I also read a note of caution. The authors of the report write that, “It should, however, be stressed that the overall average values are very heavily influenced by the large and very large estates and the median figures for average income and investment are significantly lower.” (2)

Today, SLE published a series of videos of the various presentations given at its conference. Among them was one given by Rob Hindle (on YouTube here) who was the lead researcher for the economic study. (3) In a couple of slides (around 40min in) he describes the caveats on using economic figures including that the sample is “weighted towards larger estates”, that users should “be confident in the report but use with care” and that the “median is more representative of the sample”.

In particular, he warns that, “the mean average [is] significantly skewed by the bigger numbers at one end of the spectrum – so don’t do it – it’s not helpful. You need to start looking for the middle point but be aware even so that the middle point ..there are very big differences between the numbers at one end and the numbers at the other end so the middle point is again to be treated with caution”

So what are the median values?

They are not published in the report. But I spoke to someone who was at the conference who remembered seeing a slide that had shown the difference – the “significantly lower” figures – contrasted in blue and red as an example of why the “median is more representative of the sample”. So I looked for this slide in SLE’s video.

It’s not there.

Did my friend mis-remember? I phoned him up and asked. “No, definitely – it was there. The difference was very stark – not just for tenancy figures but other expenditures as well.”

“How stark?”, I asked.

“I don’t remember exactly – much lower though – less than a quarter – even less I think in some cases.”

In the video there is one slide (at around 40min) that shows the differences for some of the data. The median number of tenants is 3 compared with a mean of 11, for example. But there’s no information on expenditure and revenue figures.

So was this information in the presentation given at the conference? If it was, why does it not appear in the video presentation?

Maybe it doesn’t really matter. What is important is that SLE misrepresented the levels of investment in its press release by picking the “mean” figure when it knew that the median was more appropriate.

I have contacted the researchers and asked if they could send me a copy of the presentation. They may, of course need to ask the permission of their client, SLE, who commissioned the report. I will keep folk posted on what transpires.

NOTES

(1) I should emphasise that the report is an excellent report and I plan to blog at greater length on its findings.

(2) the mean of a sample is the total of all the values divided by the number of values. The median is the middle value in a distribution of values. So, for example in a town with 100 houses where 99 were worth £100 each and one was worth £1 million, the mean would be £10,099 (1,009,900 divided by 100). But describing the average house price in town as being £10,999 is obviously misleading. In a skewed distribution, the median is more useful and in this case is £100 (the middle value when all values are lined up from smallest to largest) – in this case a far better representation of the average or typical price of a house.

(3) I have downloaded a copy of the video for reference.

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Price of farmland hits record high (allegedly)

23. August 2013 · 20 comments · Categories: Farming, Finance & Money, Land Values, Media

“Price of farmland hits record high” scream the headlines today across all the media. The BBC, Scotsman, Herald, and local media from the Deeside Piper to the Kilmarnock Standard.

All these stories have two things in common. First, they are virtually identical. Journalists have simply reproduced a press release. Second, they are all inaccurate. What is going on? The answer is that vested interests are successfully capturing the news agenda. In this case it is the Royal Institute of Chartered Surveyors (RICS) and they are on a roll.

Ten days ago, RICS issued a media statement entitled “RICS July 2013 Residential Market Survey” which was widely reported in the press as a recovery in the housing market with rising prices and more buyers entering the market. In reality, the survey (copy here) was a “sentiment” survey based on asking RICS members for their opinion. This is analysed as a “net balance” – a figure between -100 and 100 where -100 means all members think that a variable will decrease and +100 means they all think it will increase. As the small print makes clear, “Net balance data is opinion based; it does not quantify actual changes in an underlying variable”

The vested interest is relevant here because of course members of RICS earn their living by charging fees. In the case of land and property transactions, they typically charge a percentage of the selling price. So the opinion of RICS members is not an objective opinion.

Nevertheless, their Residential Market Survey received massive coverage. So much, in fact that two days ago, the RICS proudly announced that it had generated “our greatest number of media hits ever in one day“. I am sure their members are delighted that their membership fees are buying such good coverage of their own opinions.

So to today’s reports in the media about farmland prices. The BBC report claims that,

“The price of farmland in Scotland hit a record high in the first half of 2013, according to research by surveyors.

“The Land Market Survey by the Royal Institution of Chartered Surveyors (RICS) indicated land values had trebled in less than a decade.

“It calculated the average price of land in Scotland was now £4,438 per acre.

“Surveyors reported the price was being supported by demand from farmers and investors.

“Their report predicted further price increases were likely, with the market “far from finding its level”.

The press release from RICS claims that,

“£7,440* per acre across the UK, hitting a record high for the eighth consecutive period. The cost of land is now more than three times that of the same period in 2004 when an acre cost just over £2,400.”

That asterisk is important. It was not there when I first looked at the press release but was added after I phoned the RICS press office to ask what the following footnote referred to. The footnote says,

* Opinion based measure, £ per acre (based on median surveyor estimates of bare land only containing no residential component, not subject to revision).

Looking at the Rural Market Survey report, itself (which is only available if you register as a RICS site user), things become clearer. The basis for the claim that “prices had trebled in less than a decade” is based upon “an opinions based measure (which is a hypothetical estimate by surveyors of the value of pure bare land).”

It is also a UK wide figure and thus says nothing about the farmland market in Scotland.

The “RICS spokesperson” states, in the RICS media release that,

“The growth in farmland prices in recent times has been nothing short of staggering. In less than ten years we’ve seen the cost of an acre of farmland grow to such an extent that investors – not just farmers – are entering the market. If the relatively tight supply and high demand continues, we could experience the cost per acre going through the ten thousand pound barrier in the next two to three years.”

What she really means is that the cost of an acre of land according to the opinion of her members. And when she speculates that the cost per acre could go through the £10,000 barrier in the next two or three years – that too is simply the opinion of those with a vested interest in precisely that outcome.

And that trebling only relates to England and Wales, not to Scotland.

Oh, and finally, that £4438 per acre price that the BBC reports the RICS “calculated”?

That’s just an opinion too but reading the press reports today you would not know.

So why does the media give such prominence to the self-promotional opinions of vested interests?

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