Can you believe the statistics?

Our property markets have changed and are continuing to change but buyers, sellers and investors need to get more educated in interpreting the numbers to predict how they may be affected in the future.

1. There isn’t just one property market, there’s many

Property markets can be separated by geographical location, price point, style, old and new. Even a single postcode is made up of many different markets and so you can’t necessarily say a particular thing is happening to every property in that suburb as that might not be true. So, having one clearance rate for the whole state, entire city or even a suburb isn’t always a true reflection of what’s happening.

2. There are many median prices

We currently have three main companies that report our property statistics and these are CoreLogic, Domain and SQM Research and even they can’t agree on what the median price is in a particular state. They all promote they have the most accurate method and who is to say who is right, as we are all mere mortals compared to their very sophisticated and educated economists and statisticians. If they can’t agree on what’s the actual median price at any particular point in time, it’s just as hard for them to agree what is the actual price or growth change from week to week. Also, there’s a different median price whether you’re looking at the whole state, the city, the inner city, the regional areas, houses or units, etc.

3. There can be so few statistics, the numbers are often manipulated

Sometimes there are so few properties sold in a week that results have to be averaged. And if a new development has just launched one week you might get lots of $500,000 sales and then the next week a bunch at $1 million, but that doesn’t mean the median priced has really changed and the area is showing some growth or a drop. So, the results have to be edited – sometimes they call it seasonally adjusted. Again, there’s nothing wrong with that, but it leads to more interpretation.

4. One figure is an average of a whole lot of figures

Even if the capital growth in an area is predicted to be zero, that can mean that some properties are growing at 10 per cent and some are falling at 10 per cent giving an average of zero. The same goes for auction clearance rates – if the average is 60 per cent, some of the areas are getting 80 per cent and some are only getting 40 per cent. And then if you go into the areas that are getting 80 per cent, some property will be getting 95 per cent and some only 65 per cent. You just need to find the properties that are performing rather than those that are not.

5. You can break the rules

Many businesses in the Global Financial Crisis were profitable even though many were going bust. People tightened the reins, pulled back on their expenses and became efficient and profitable. The same goes for property – if you plan well enough in advance, when the market does change, which it is doing now, you’re more likely to weather the storm. And if you find you are struggling in the storm, the better advisers you have, the more likely you are to get a contrarian view and be able to do the opposite to what the rest of the herd are doing.

I’m not saying to not believe the statistics you are given, and I applaud the companies that put them together as it’s not an easy task and they’ve very clever people. I’m just saying that it’s all in the interpretation of those number for the particular market segment that you’re interested in.

Brand new properties in highly dense areas where there are tens of thousands of properties that all look the same (high supply) are more likely to fall due to speculators and foreigners not being able to get finance (low demand) and/or rural areas where there’s also lots of land and not much demand. Typically, median-priced, second hand properties in the inner city are those that are still in short supply and in higher demand and are more likely to be on the upper end of those statistics in the good times and the bad times and so that’s what I tend to invest in.