CoreLogic regularly releases its median values of all the major capital cities in Australia on a monthly, quarterly and yearly basis to provide a barometer of the Australian housing market.
But what does this all mean?
It is worth starting with the various methods of determining the value of houses in a suburb. Most economists will use the median, which is the middle value of all results not the average of all results. This eliminates extreme high and low results to provide more stability when comparing different periods.
Median Sales Price – Who uses this method? API Price Finder
Approximately 7% of a suburb is for sale at any one time so in a suburb with 5,000 houses only 350 will be listed for sale and of those that sell the middle sale will be the median sale price in that suburb. The advantage of this method is that it is based on actual sales in the past 12 months compared to the previous 12 month period however it can be skewed by changes in the type of houses being sold. For example there may be more 4-bedroom houses being sold in the past 12 months compared to the previous period, which would push the median sales price up for houses.
Median Listing Price – Who uses this method? Listing sites like realestate.com.au that have live listing data.
Similar to median sales price however this includes listing prices only. The advantage of this method is that it is live and up to date on a regular basis. It will give you an idea of how optimistic vendors are compared to the same period 12 months ago. The downside is that it does not take into account what has actually been sold and therefore any discount to listing price.
Median Value – Who uses this method? CoreLogic
This method is based on an estimate of all house values in a suburb using actual sales in the past 12 months to help determine those values. Banks most commonly use this method as it is a more stable way of determining the movement in house values.
So these are the most common methods used to determine median values in a suburb and growth compared to the same period last year but how useful are these figures. Very useful however you need to know how to apply them. How can we use them to help us purchase the right property?
To identify where an area in in the property cycle. Is the area growing fast or slowing down? If the median value or price in a suburb has grown strongly in the past 12 months then the market is in a growth phase or upwards cycle. Don’t just look at the last 12 months but the period of growth since the last trough to determine how long prices have been growing for and whether they are expanding or slowing down. Remember to also look at the number of sales or volumes to determine where the area is in the cycle.
To help you identify an area that has underperformed. The longer the period of low to no growth in an area the more chance that area will grow in the future based on long term growth rates The longest data set for housing in Australia is from 1973 to 2003 (30 years) and shows long term growth rates for Sydney, Brisbane and Melbourne between 9.2% - 9.8%.
To identify where your property price or value is based on other properties in the area. Are you buying above or below the median value or price in the area? When choosing a property to buy it is good to know where your property sits in the area. If buying below the median your property will be more affordable and most likely have higher capital growth (in percentage terms) than more expensive properties. Remember there are more people who can afford a property at lower price point.
Don't buy a property without doing your homework otherwise you may as well go to the casino. Median values are a great place to start.
If there is anything else you wish to know about researching the property market, then please feel free to contact us.
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