The long and short of property statistics

Here is a copy of a great article I recently saw on news.com.au written by Anthony Keane of News Limited Newspapers.
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Property statistics can be confusing unless you analyse what they mean, writes Anthony Keane.

While the numbers don't lie, they don't tell the whole truth. Statistics don't always paint a clear picture and property is no exception.

For everyone looking to invest in property, it pays to take your statistics with a grain of salt.

Many people use stats as "proof" without understanding their limitations, Property Investment Adviser director Will Chapman says.

"If you make a large financial decision such as buying a property based on limited data, the wrong decision can be made," Chapman says.

Anyone who watches housing values knows "median house prices" can vary by more than $50,000 depending which research is used.

So it pays to make sure you are comparing apples with apples.

Despite the differences, the companies that supply real estate data play a valuable role.

Statistics can help people make accurate investment decisions as long as buyers understand the issues.

Median house prices the most common form of measuring real estate values may vary wildly because of all kinds of things which, when they are properly analysed, don't really alter the value of your house.

For example, a major new subdivision in a suburb can have a massive impact on the median value.

Hundreds of new small blocks selling at a lower price can dramatically affect data.

"If parents sell their home to their kids at a discount nice parents the statistics may still show it as a normal sale," Chapman says.

"If you're looking at a property's past sales and can't work out why it went so cheap, this may be a reason.

"In some cases, only half a property will be sold if the partner buys the other half out.

"Generally, this will be noted but be aware that it can mislead."

Inner-city and central business districts also have big variations. Properties in these areas can range from $300,000 apartments to $6 million residences. But a suburb of three-bedroom houses on 500sqm blocks won't have much variation.

While the numbers don't lie, they also don't tell the whole truth either, Chapman says.

Remember that median house prices are not an average of all sales in a suburb or city.

The median price is the middle sale, the seventh in a group of 13, for example.

Australian Property Monitors, one of several data providers, says the different median prices reflect the analysis by each researcher and their historical data base.

"Essentially everyone has access to the same data you buy it from the state governments," APM spokesman Matthew Bell says.

"But the trick is how you clean the data. Sometimes providers will look at a dwelling price but not split it between houses and units."

It also depends on the size of a property. Bigger also doesn't always mean a higher price.

"The majority of two-bedroom houses tend to be closer to the CBD and therefore more expensive, whereas three-bedroom houses span right out to the outer suburbs," Bell says.

And don't get too upset if you suddenly see prices in your area plunge.

"If a median price falls by 50per cent in a suburb, it doesn't mean the value of most houses has fallen 50 per cent. It might mean a lot of two-bedroom homes have been sold," he says.

It also pays to read the commentary and notes included with any data to help work out the "lies, damn lies and statistics".

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As real estate agents we try and combine all the research and statistics on house prices with recent property sales in your area when providing property appraisals.

For an obligation free appraisal on the price of your home call me on 0411 664 490.