In this era of big data, there are plenty of property numbers to call on. For example, there are median prices, rental growth percentages, rental vacancies, auction clearance rates, vendor discounting percentages, and home loan tallies, to name a few.
The question is, however, what numbers really matter to the average property buyer?
Sizing up auctions
Last week, Sydney posted an auction clearance rate of 84%, with 661 of 844 auctioned homes selling, according to CoreLogic RP Data’s preliminary data. In isolation, this percentage figure doesn’t tell us much – other than that scores of buyers were out looking for a property and were willing to compete at auction to secure one.
The median price at auction perhaps gives us a better yardstick. It was $1.2m in Sydney over the weekend, as per Domain Group, a very high number that’s said to be more than 10 times the average salary in the city (based on figures from the Australian Bureau of Statistics).
Armed with this information, and perhaps with a more specific idea of the total number of auctions in the area you’re interested in (for example Domain Group reported 20 auction sales in the North West of Sydney last weekend) you might feel better equipped to face the market.
Furthermore, you might also refer to the SQM Research ‘asking price index’, which shows median asking prices for specific property types in specific suburbs, on a weekly basis.
Mulling over the median
Keep in mind that the median figure isn’t perfect. It represents the middle price in a series of sales – not the average price – where half of the sales are of lower value and half are of higher value. So, for example, if you have a list of 25 sales ranked in order from lowest to highest, the middle figure on that list – the thirteenth in this example – is the median price.
Chief executive of Propertybuyer.com.au, Rich Harvey says median price figures can trip you up if you don’t understand them.
“Median prices movements can be very misleading in some suburbs as this is heavily influenced by the type of properties sold,” says Harvey. “For example, if ten $5m properties are sold in one year [in an area], that might give you a $5m median. But if the next year twenty $3.5m are sold, the median is [likely to be] only $3.5m. Does this mean the suburb has gone down in value by $1.5m? No, it just means different types of properties sold that year.”
Harvey says that he prefers ‘repeat sales’ numbers, which measure the capital gain across individual properties that have resold.
“The repeat measure takes into account a more diversified cross-section of property prices,” says Harvey. “So it’s a more accurate measure of price movement.”
Harvey also recommends historical and trend based data like those figures associated with long term sales, population growth or changes in interest rates.
“I like to look at the volume of sales historically,” he says. “It’s another indicator of activity in the market and tells you how tightly held a market is. The more tightly held, the lower the volume of transactions.”
Harvey cites Mosman in Sydney’s north as a good case study, as its declining volume of sales over the last ten years typically shows a very tightly held market.
Piecing the story together
Of course, all data needs to be taken in context. CoreLogic RP Data’s head of research, Cameron Kusher says that the company’s weekly wrap of stats should be seen as a guide, especially given that smaller local markets may be perform differently to a city as a whole.
“The clearance rate data, for example, is provided at a more localised level in Sydney and Melbourne and will give an understanding of how strong demand is for auctions in regions of the city,” says Kusher.
“The listing data is also fairly valuable as it provides an understanding of the amount of supply for sale. When compared with value growth, time on market and discounting data, it can give an overview of the drivers of the market.”
Time on market numbers are quite handy because they show how quickly buyers are scooping up property in a city. For instance, Sydney’s median time on market for houses in the month to February 19 was just 37 days. This led most capitals, bettered only by Melbourne with 36 days on market and Canberra with 33 days on market.
At a glance, this suggests that much of the house buying action is in Canberra, not higher priced Sydney. However, the total number of property listings in Sydney (19,774) over the same period dwarfed the total in Canberra (2,031), indicating that Sydney’s selling times in a significantly larger pool of properties are that much more impressive.
By combining stats in this way, it’s much easier to create the context needed for a smart investment and Kusher says that Sydney’s current numbers best illustrate this.
“Sydney homes are selling quickly with relatively little discounting, while the total stock for sale is much lower than it was a year ago, and auction clearance rates are strong,” he says. “Given these factors, it’s no surprise Sydney values are rising. You have lots of demand, little stock and subsequently the competition is driving up the cost of housing in the city.”
By: JP Pelosi
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