I've been looking at the auction results and the historical results of some sales in the past and generally the only information available is the transacted price or asking price. Even releases from RP Data is more about median prices of suburbs, which is about as useful as sifting through a basket filled with random fruits. Why can't we use a standardized reporting tool of per sq m basis which will give us a meaningly unit of measurement which can be compared across all suburbs and periods?
No two properties are directly comparable. How do you compare a 3 bedroom house on 600 m2 with a 2 bedder on 650 m2 which sell for the same price? You must compare like for like! Basically you need to develop your building cost for each house, adjust it for depreciation/age then deduct it from price achieved. Deduct the cost of other improvements (garages, paths, landscaping etc). You are then left with a land cost (which still isn't comparable as you then need to consider amenity, slope, orientation, distance to services etc). Once adjusted, you can then get back to a $/m2 for the land. This will give you the basis for your land cost in an area (adjusted again for better/worse locations to the subject site), then just add a building etc (and depreciate to the required level).
Even on a sq m basis, it is still not like with like if one has budget inclusions and the other top of the line. That is why you need to be an expert in th earea you wish to invest in. Know that the price increase on $60K on property A is not due to capital growth, more due to the $50K they spent on their reno, which is not reflected in the statistics. That is one reason to take the figures for what they are, just a guide. It only takes a few "odd" sales to skew figures.
Mick
Scott No Mates wrote:No two properties are directly comparable. How do you compare a 3 bedroom house on 600 m2 with a 2 bedder on 650 m2 which sell for the same price? You must compare like for like! Basically you need to develop your building cost for each house, adjust it for depreciation/age then deduct it from price achieved. Deduct the cost of other improvements (garages, paths, landscaping etc). You are then left with a land cost (which still isn't comparable as you then need to consider amenity, slope, orientation, distance to services etc). Once adjusted, you can then get back to a $/m2 for the land. This will give you the basis for your land cost in an area (adjusted again for better/worse locations to the subject site), then just add a building etc (and depreciate to the required level).No offense mate, but you might be over-analysing it. There is a need for a single, straighforward metric that can instantly be used as a yardstick for most people, and median house prices is just way too misleading. I believe reporting on a per sq m basis leads to a more transparent comparison. With median prices used it can be very easily skewed but on a per sq m basis its a lot clearer what the overall trend is.
I do agree with you on there being a lot of variables to prices being sold, but once per sq m is established in an area and generally known, for example toorak costing generally $1000 per sq m, then deviations from that measurement tends to be quite limited.
sq metre of land or house size?
Clubby, you have missed the point totally. No two properties are identical therefore if you want the correct analysis you must undertake a methodical valuation of the premises ie engage a valuer if need be.
Stats are just that, an analysis of the sales in an area without taking account of what data is contained (bar separating out units from houses) – there is no consideration of land size, house size, age, specific location, new developments, vendor terms, zoning etc.
You simply cannot rely on the basic information which is reported to come to an accurate or reliable yardstick by which to measure each property. How, without thorough analysis (including site inspections) can you compare two houses? They both may have 3 bedrooms/2 baths & a slug but one may be larger/newer etc but on the main drag (side street address) and the other a dilapidated shack on a good street..
Your only basis for comparison is direct comparison by removing all improvements then adjusting for differences in location to get you back to a $/m2 for land. Then develop your model with the knowledge that a 600 m2 block will cost $500/m2 or whatever plus the cost of the house & improvements.
Read a good text on property such as Real Estate Fundamentals by Gunther (probably out of print) but well worth the read in order to understand the methodology.
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