Investors misled by skewed median prices
In areas with a high number of new dwellings, investors should be wary of using the median price as an indicator of value, according to a national buyer’s agent.
When buying an older property near a new development, investors may believe they have snagged a bargain because the property comes in well below the suburb median, Right Property Group director Victor Kumar said.
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However, this median may have been distorted by the high proportion of brand new, premium houses on the market.
“The median price is skewed because there are a lot of new property sales in the area,” Mr Kumar said.
“If people are buying older homes, if they are buying $400,000 and the newer homes are selling for $550,000, they think they have got a bargain. But in reality, it might not be a bargain.”
Nonetheless, he believes new properties can also drag up the value of older properties in the area.
“You have already set the precedent and set a higher ceiling, so that's what the market is now accustomed to,” he said.
As an example, he explains older properties in the suburb of Minto have become more valuable as a result of a new housing estate.
“Because the new properties are selling for $550,000, that ultimately pulls up the prices of the older properties, because they have bigger land content,” he said.
