Help! Change in Median House Prices, I am confused!

Discussion in 'Investment Strategy' started by Harry30, 17th Oct, 2018.

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  1. Harry30

    Harry30 Well-Known Member

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    A friend asked for some advice around selling a property in Melbourne, and particular, how they go about setting a reserve price.

    House is in Bentleigh East in VIC.

    Among many things, I was interested in understanding what has happened to prices over the last 12 months. The agent is saying that prices in the area (Bentleigh East VIC) have fallen by around 10% in last 12 months. I hear much the same thing from other people (about prices in general in Melbourne), and it sort of aligns with some of the commentary I read on PC.

    Then I look at the median house price data, and it tells a slightly different picture - ie a rise of ~4% in the suburb over the last 12 months. I looked at 3 surrounding suburbs and got roughly the same result - price increases of 0-5%.

    What I am missing? Is this just a lag in the data? Should I be looking at other data sources on median house prices?

    B7AF1CCB-7624-4DB8-8747-EA5B9C7D65AB.jpeg
     
  2. thatbum

    thatbum Well-Known Member

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    Median house price data is generally pretty bad for determining how prices have moved in like for like properties.

    Your friend needs to do more research into comparable sales if they want to know about how much their property might sell for.
     
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  3. Harry30

    Harry30 Well-Known Member

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    Done that as well. It does not suggest anything like a 10% reduction in comparable sales.
     
  4. Harry30

    Harry30 Well-Known Member

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    Not saying for a moment that changes in median house prices is the only thing you look at. The point is, agent is saying that average prices have come down by 10%, and I am not quite seeing that in the data on average prices (well, median prices to be precise).
     
  5. thatbum

    thatbum Well-Known Member

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    I wouldn't bother looking at median house price stats at all. I would look at comparable sales and what's on the market now.
     
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  6. Shogun

    Shogun Well-Known Member

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    . Get a professional valuation?
     
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  7. Harry30

    Harry30 Well-Known Member

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    Will not go into all details, but the property being sold is quite unique. There were some very comparable properties to it sold (almost identical), but those were around 12 months and 18 months ago. The agent is making the argument that the general market has moved in that period - ie it has fallen by around 10%. If you look at the median house price, the data does not show that.
     
  8. Angel

    Angel Well-Known Member Premium Member

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    Talk to another agent
     
  9. kierank

    kierank Well-Known Member

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    I wouldn’t do that.

    Valuers have no idea of what the market is doing today :eek:.

    That is why banks use them :D.
     
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  10. klabat

    klabat Well-Known Member

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    Valuers have their place in the process.
     
  11. Sackie

    Sackie Well-Known Member Premium Member

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    I wouldn't bother with a valuation - its nonsense.

    I would be doing what @thatbum said, look at comparable sales (apples with apples) and what stock is currently on the market and how yours will fare with current supply and their price points. If you do that properly, you will get a very good indication.
     
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  12. kierank

    kierank Well-Known Member

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    ... and that is?
     
  13. Shogun

    Shogun Well-Known Member

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    I don't think anyone knows what is going on truly in the market.

    Real Estate agents are about as trustworthy as used car salesman possibly less imho but ymmv. They have a vested interested in selling your property. They get a commission. They just want a sale.
    At least a valuer gives you there estimated property value for a fee. I suspect they have nothing to gain or lose on that number.
     
  14. kierank

    kierank Well-Known Member

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    The problem is they use data from settled sales, it can be up to 3 months out of date. I have had to pay for some really ridiculous valuations over the last 40 years in the property market.

    I would rather use current listings of comparable sales to come up a price range.
     
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  15. QldKoolies

    QldKoolies Well-Known Member

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    Settled prices not sale prices determine value. An agent will tell the seller what they want to hear to get the listing, then take them on a journey demonstrating ‘market sentiment’ and work them down in price. A hidden search price gives you very little indication of what its worth, you’ll just find sellers on a journey. Surely this is common knowledge?
     
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  16. Sackie

    Sackie Well-Known Member Premium Member

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    For me, its a mixture of both. Recent sales (within a few months) provides historical perspective and a possible sale range. Current sale prices can reflect changes in market sentiment/range movement for both going up or down. Personally, I believe both have value and when looked at together can provide a greater depth of insight.
     
    Last edited: 18th Oct, 2018
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  17. kierank

    kierank Well-Known Member

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    Totally disagree.

    Get two valuers to independently produce a valuation of the same property at the same time.

    Do you truly believe they will always come up with the same number?

    That is nearly as ridiculous as someone saying that they bought s property below market value.
     
  18. Sackie

    Sackie Well-Known Member Premium Member

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    Say what....im somewhat of a big believer in BMV buys....:oops:
     
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  19. Harry30

    Harry30 Well-Known Member

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    Putting aside for the moment the merits of this data for setting a particular reserve price, my key question is really about the apparent disconnect between what people are saying anecdotedly about how prices have changed and what the data on median price changes is showing. For the suburbs in question, people are saying there has been a 10% drop, but this is not apparent from median price data. When I cast my net a little wider to look at other surrounding suburbs, some of the data is showing 3.5% drops in some areas but nothing like 10%. Not sure whether the data is recorded at time of sale or time of settlement, so that would put potentially put a 2/3 month delay before any drops are properly reflected in the data.
     
  20. Sackie

    Sackie Well-Known Member Premium Member

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    Quantitative data is only useful up to a point. And often when looked at in isolation (IMO) can be quite misleading . The important ingredient missing here is qualitative data. Talking to agents and players on the ground, then synthesize their feedback with some quantitative figures and you'll get a more robust, reliable indication of price .