Quarterly Property Market Update – September 2012

Based on The Age Sunday Results*

Careful Reading Those Many Statistics

Statistics can be very useful in telling us the state of things… As they are thrust in front of us constantly concerning almost every subject under the sun, we are therefore well informed. Thank goodness for statistics we say! That is, until you start reading real estate statistics…

A friend recently forwarded some information received containing some in-depth analysis of how the Melbourne property market was travelling. We had a read… Fascinating! Confusing, but fascinating. In it was a summary of different suburb median prices for the June quarter. I approached the item with a mixture of curiosity and “breath-holding”, anticipating a little real estate enlightenment (enlightenment did follow) After re-reading it, I almost immediately got onto amazon.com to buy a book on clear thinking. I surely must have missed something – the true meaning???

In it, we are told that for the quarter, both Malvern East and Balwyn experienced median price increases of 26%; whilst Hawthorn East and Glen Iris decreased 21% and 13% repectively. (these are similar and neighbouring “prestige” suburbs) Typical of this grabbed “statistic”, it read like a spider had been drawing on the graph paper again…

Providing median figures in such a short time span is akin to measuring the proportions of an atom with a ruler… It’s pointless. To a reader looking for a gauge of trends, it can give a very misleading impression. Clearly, values in those areas have done nothing like those percentages indicate. Median price measures the middle sale price, during the period – i.e. half sales results above, half sales results below. It is therefore subject to enormous irregularity.

Real estate values move like an ocean liner, not a surf board. Thinking of it like that will keep your head clearer and you’ll be just as well informed as the next person. But if you feel you must know, aim to understand the basic trends … After that, good property selection is the key… Oh, and by the way, I can lend you that book on clear thinking if you think you need it after reading this!

Happy House Hunting

Bruce Renowden