Data master: Q&A with Louis Christopher

I was involved with property from a very young age and bought my first commercial property at 23 years old. I experienced some setbacks during these early years, but I believe that you learn more from your failures than your successes.

In hindsight, I see that my problems were often caused by a lack of reliable intel. Indeed, I credit these initial failures with fuelling my interest in the idea of utilising and developing data collection processes.

Therefore, I founded SQM Research on the premise of attaining effective information and being a data collection body that investors could trust. Whilst data analysis used to be attached to industries like technology and IT, it is now an essential aspect of the Australian property market.

Only 10 years ago, having the latest sales figures for a suburb appear on your smartphone might have seemed like a novel concept, but it is now commonplace. Moving into the future, I think that the industry has a lot of longevity because statistical data is useful in both boom and bust periods.

Q. What are the dangers of basing investment decisions on median price?

The main problem with using median price is that the figure is affected by the size of the property market. The median value is likely to be unreliable if there has been a small number of sales in a specific area. For this reason, most data houses extract the median price at a suburb or postcode level and analyse the data yearly instead of quarterly.

As property sales generally mount up throughout the year, this longer time frame reduces the possibility of inaccurate results.

The property market in Australia has a value of about $5 trillion for residential properties alone. To put this figure into perspective, you need only look at the ASX200, which stands at a value of about $1 trillion. Therefore, this data must be collated from a number of sources, ranging from state government bodies, right through to property agents inspecting suburbs and properties in the field. This broad range of data collection services provide unique results – the challenge faced by analysts is to compile credible data reports.

Q. What are some common misconceptions Australians have about property and property prices?

With regard to owning a great property in a great area, Australians must get the idea of an ‘Australian dream’ out of their minds – owning such a property is simply not possible for an entire society. Moreover, this is in fact a global dream that cannot be fulfilled with supply and demand constraints.

There is a culture within Australia that supports the belief that first time buyers should be able to live in any area they choose. However, this feeling of entitlement is a hindrance for investors who aim to make intelligent investment decisions.

Australians must get the idea of an ‘Australian dream’ out of their minds

Developed areas with effective transport links and numerous social amenities are always going to be in demand and will invariably contain expensive properties. Therefore, those who cannot get the capital to buy property in these markets must make some compromises. For example, many first-time buyers in the 1960s and 1970s had to buy property on the outskirts of major cities. Though this is still the reality, there hasn’t been enough drive to promote or even normalise this tactic culturally.

Q. What are some of the biggest mistakes investors make when trying to understand property data, and the wider property market?

I think that many investors are prone to what I call ‘analysis paralysis’, meaning that they over analyse a suburb’s data.

Of course, it is crucial for them to fully understand the data, but not at the cost of neglecting a proactive approach to exploring the property market. It’s about creating a balance between analysing the right data and seeing the property with your own eyes.

We always recommend that our clients use a reputable source to value a property before investing. If the property valuation is positive, then investors should investigate factors like the suburb’s sensitivity to interest rates, housing supply, and its general economic performance.

I advise investors to remember that property can be a safe and an unsafe asset. For example, buying multiple high-end properties off-the-plan would be a very risky approach. But, each situation is unique and must be viewed as such.

Q. Have mining towns had their dash?

SQM forecasted the downturn of mining towns two years ago and we are seeing the repercussions of that activity now. Investors who bought property in towns like Karratha during the boom period could see a 50 per cent drop in their capital value, according to our forecasts.

The area’s major projects are completed, and there doesn’t look to be any new ones in the pipeline. Factors like rising unemployment and the devaluation of raw commodities like iron ore do not bode well for the immediate future of mining towns. However, investors seem to be well aware of these factors and are investing elsewhere.