Most of us know to use caution when reading statistics but more and more we’re witnessing headlines that claim to report definitive trends in markets – all based on facts and figures that are supposedly unquestionable. They mightn’t be “damned lies” but many real estate stats should be read as a rough guide only.
Suburb sales prices are a best-seller for the Sunday papers and everyone loves to have boasting rights ahead of a brother-in-law from a less ‘successful’ area! But in quoting “median sale prices” there’s often little regard for reliability of the numbers. Many suburbs have just a handful of sales each quarter – Highgate Hill is a great example with just 50 houses sold in 2006 and a measly 8 for the September quarter. And of course the reported price is based on sold properties only. Right now the stats report a flat-lining median price of $555,000 throughout both 2005 and 2006. The truth? This suburb is witnessing extraordinary interest from buyers but no-one is selling. Owners are spending heaps in renovating and the reported sales, in our opinion, reflect the older stock that’s changing hands pre-reno. Nowhere near an accurate picture of the overall price trends…
Rental prices can’t be quoted with any certainty in Queensland either: our Residential Tenancies Authority reports only the rents for new bonds lodged in each quarter. It does this for each type of dwelling but doesn’t collate, so you can look only at 2 bed apartments or 3 bed houses for example, but not an overall market trend. And in not reporting existing tenants’ rents the RTA stats don’t provide a ‘whole of market’ view. Rental trends can be charted, but a more detailed understanding takes time.
Investors might take comfort that at least their stockmarket holdings are easier to trend-line. Tune in to your channel of choice and you’ll hear the newsreader quote the movement of the All Ordinaries – but what does that number actually mean? The index is made up of the weighted share prices of just 500 of the largest Australian companies. There’s currently 2030 entities listed on the ASX. So it’s not “all” and it could be “ordinary” but it may not represent what happened to your shares that day!
So what hope do we have of navigating through to the real picture? We urge property owners, tenants and buyers to read property stats with caution, to do your homework, and, as with most successful stockmarket investors, put some trust in advisors that have earned your confidence.