Hi all,
I'm posting this because its a pet gripe I have. That all of a sudden one particular suburb seems to have a magnificent growth rate for some unknown reason. And usually there is a more honest reason.
I bought the Feb edition of a certain property magazine (no names given). And it has a whole set of pages at the back dedicated to property prices. Now I looked up units in an area i'm familiar with (Caulfield). The median price was now at 712k for units. And once you factored this price in .. there was an amazing jump of 5yr growth of 112% .. wow cool .. amazing.
Except its wrong. Your avg place hasnt gone up tremendously in Caulfield. What has happened is that developers have been building new and luxury larger than average apartments in the area. With prices well and truly over the 750k mark. They are still classed as units .. but they are pushing the price bracket up in the area.
So to the person who doesnt know any better .. they look at this and go .. WOW .. if i punt my money on a place in Caulfield, I get a fantastic 5 year return!
I know these statistics arent meant to be perfect, but to include these new luxury apartments in the equation skews the figures badly for maybe a quarter or two.
This of course leads me to the next question. If a suburb I know, can be this badly distorted in figures .. how reliable are the figures for the other hundred suburbs it covers?
Yep, I’ve seen confusing info with a suburb I’ve been keeping an eye on. One mag says it increased by double digits over the quarter while the other mag states that growth has declined by roughly the same amount over the same period.
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
You have to understand what is behind the numbers because they will only tell the story that the author wants the reader to hear!
Median prices, like average prices are someone's interpretation of how/what has been reported as sold but generally does not include the analysis of how they have determined those averages/medians. What do I mean? Has the author included all sales? Should they have included all sales? What rigor have they used to cull out non-comparable properties ie related party transactions, old stock vs new stock, similar sized premises (2 or 3 beds, parking vs garage) etc.
A typical scenario, as pointed out above: if normal sales are 50 units/year for older style 2 or 3 bedroom units with a median price of $300k. Then the developers get onboard releasing 100 units/year for the next 5 years @ prices 40-50% above the (old) median price (say @ $450k). Supply has dramatically increased and the total value of sales has increased hence the average and median prices would also be draggeed up (probably nearer to $400k). It doesn't mean that the bottom end of the market (old property) has moved but the quality of stock at the other end (new property) has improved. All too many believe the numbers don't lie – they don't, you just have to know what to look at to compare apples with apples.
Everyone can find similar stories in a suburb close to home – but if you understand what is behind those figures then you may have more information next time around.
xdrew wrote:I know these statistics arent meant to be perfect, but to include these new luxury apartments in the equation skews the figures badly for maybe a quarter or two.These 'inaccurate' statistics could be a self-fulfilling prophecy however. With luxury housing in the area and cashed-up owner-occupiers or investors buying in, the overall image of the location could change and housing in the surrounding area could experience jumps in price.
There is higher quality data out there! The main housing index providers all seem to do a very decent job in my experience.
Why medians are used so extensively is perhaps related to price and habit more than anything else, I hardly pay any attention to them at all.
Hi Allen
Would you care to give name of the provider with this Information is it maybe RP data or Residex ????
Yhanks
LorraineAndrew_A,
Could you please also shed some light on these housing indicators?? I have only ever looked at median price before, knowing that they were not the best but it was the best thing I knew.
Cheers,
LukeResidex have free capital city data.
Chris Joye also has a good article to explain the basics.
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