Investors ask: Skewed property prices
Q. I’m looking to invest in regional areas but I am sceptical about some of the price growth figures I read. When you’re dealing with a smaller number of properties, how can you be sure the data is accurate and not just being skewed by a few big sales?
A. People need to look at the types of properties which sold during that data collection period.
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If you’re looking at a certain regional market and you can see very strong price growth over the past five years, it could mean that there has actually been a whole lot of new development in the area. So you need to compare what was being sold at the start of the five-year time frame and what types of properties were being sold towards the end. If five years ago the area’s sales were dominated by lower-quality housing than what’s selling now, then that will obviously affect the results.
Also bear in mind that when you’re looking at median prices, you’re just looking at those properties that actually transact, not the whole market – so it’s something that people really do need to research quite closely because what was selling five years ago could be significantly different to the types of properties that are predominantly transacting now.
Cameron Kusher, senior research analyst, RP Data
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