{"id":20220,"date":"2018-02-12T01:00:47","date_gmt":"2018-02-11T14:00:47","guid":{"rendered":"https:\/\/www.realestatetalk.com.au\/?p=20220"},"modified":"2018-02-12T01:00:47","modified_gmt":"2018-02-11T14:00:47","slug":"dont-get-hung-up-on-median-prices-rich-harvey","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/dont-get-hung-up-on-median-prices-rich-harvey\/","title":{"rendered":"Don\u2019t get hung up on median prices \u2013 Rich Harvey"},"content":{"rendered":"<p>Australia\u2019s largest body of professional buyer\u2019s agents is warning property buyers not to make their purchasing decisions based on median house price values alone. This has long been a beef of mine and I talk to <strong>Rich Harvey<\/strong> about why it is a mistake to consider median prices as an indicator about moving property values.<br \/>\n<strong>Transcript:<\/strong><br \/>\n<strong>Kevin:<\/strong>\u00a0 I was delighted the other day to read that Australia\u2019s largest body of professional buyer\u2019s agents is warning homebuyers not to make their purchasing decisions based on median house price values alone.<br \/>\nThe Real Estate Buyers Association of Australia, REBAA, and their president, Rich Harvey, said that many buyers wrongly used median house prices as the benchmark for measuring growth. Well, I have to say I can\u2019t blame them, because it\u2019s all over the media. To join me to talk about this, Rich Harvey.<br \/>\nGood day, Rich. I get very frustrated about this. And I know I\u2019m in the media, but the media seems to be so focused on saying what\u2019s happening with the median almost as if it\u2019s an indicator about what\u2019s happening with the market.<br \/>\n<strong>Rich:<\/strong>\u00a0 That\u2019s right, Kevin. It\u2019s a pleasure to be on your show again, as always. I like catching up with you. That\u2019s always good, and I love the way you give insightful information to your listeners and readers, so always good.<br \/>\n<strong>Kevin:<\/strong>\u00a0 Thank you.<br \/>\n<strong>Rich:<\/strong>\u00a0 I\u2019m a bit like you; it\u2019s one of my pet topics as well. I get sick of the way misinformation is presented. It\u2019s funny that media and median only has an N difference in the two words. But I always advise people, don\u2019t put too much faith in median prices, particularly short-term median price movements. That\u2019s what the media focus on.<br \/>\nThey\u2019re saying \u201cIn New Farm, the prices have dropped 5%,\u201d and that\u2019s off the basis of about four or five sales. If you\u2019re looking at median house prices, you have to look over a one- to two-year time horizon as a minimum. Monthly medians have become meaningless in my opinion.<br \/>\n<strong>Kevin:<\/strong>\u00a0 But median house prices have nothing to do with value; it\u2019s really an indicator about where people are buying, rich.<br \/>\n<strong>Rich:<\/strong>\u00a0 That\u2019s right, exactly. I\u2019ll give you an example. If you take Vaucluse in Sydney, where your median house price is somewhere between $3.5 to $4 million, in one year, you might get ten sales of $10 million \u2013 in that range \u2013 and suddenly, the median jumps up 50% to an $8 million median. But the following year we have a currency crisis and there are very few sales, there are a couple of sales around the $2.5 to $3 million mark, and the median might be $3 million. Oh, it\u2019s dropped 110%. They\u2019re wild fluctuations.<br \/>\nWhat people need to look at are repeat and comparable sales. You have to look at prices based on comparable sales. That\u2019s the key thing.<br \/>\n<strong>Kevin:<\/strong>\u00a0 Buyers move in and out of markets, and if you only have a few sales in a particular market, you can\u2019t judge anything on the median. Aspirational buyers will buy up; that doesn\u2019t necessarily mean that the values are going up.<br \/>\n<strong>Rich:<\/strong>\u00a0 That\u2019s right, correct. Even within a suburb, there will be types of properties that will be in higher demand and other properties that will be in lower demand.<br \/>\nOne of the tricks is to look at the volume of sales in a suburb. If there is a high volume of sales of a particular type of property, that\u2019s a pretty good indicator. If you can trend three-bedroom or four-bedroom houses as going up at a certain rate, you can actually get a pretty good gauge as to where the prices are going to go in the future.<br \/>\nBut if you have a huge eclectic mix of apartments, townhouses, houses, and villas, all different species of properties, it\u2019s a lot harder to track what capital growth might be.<br \/>\n<strong>Kevin:<\/strong>\u00a0 Yes, indicators like stock on market. If you only have two buyers in a market and you have a hundred properties, well, I can tell you now that prices are not going to go up. It really depends on the balance between the amount of stock and the number of buyers in the market.<br \/>\n<strong>Rich:<\/strong>\u00a0 Exactly right, that\u2019s a much better indicator. Another good indicator is days on market. How long is it taking for a property to sell? At the height of the boom in Sydney and Melbourne, it literally got down to about 25 days on market. We\u2019ve turned the corner now, and it\u2019s in the high 30s, and it will probably get back to around the 50s or 60s \u2013 so one to two months, probably two months on average.<br \/>\nWe\u2019re not in a buyer\u2019s market yet, but we\u2019re coming out of a seller\u2019s market in the two major capitals. It doesn\u2019t mean that those markets are dead, but you have to be very careful how you read the tea leaves of the property market.<br \/>\n<strong>Kevin:<\/strong>\u00a0 The bottom line here, Rich, really is read indicators like days on market, how long is it taking to sell a property, how many properties are on the market, how many buyers are in the market.<br \/>\nI\u2019ve always found a good benchmark that if you have about six months\u2019 worth of stock \u2013 in other words, if it\u2019s going to take six months to sell all the stock in a particular area right now \u2013 then you\u2019re going to have a fairly stable market. If it\u2019s more than that, prices are probably going to be under pressure. If it\u2019s less than that, prices are probably going to increase.<br \/>\n<strong>Rich:<\/strong>\u00a0 It comes down to simple supply and demand, Kevin.<br \/>\n<strong>Kevin:<\/strong>\u00a0 It does.<br \/>\n<strong>Rich:<\/strong>\u00a0 You have to also look, as you said, at the volume of stock coming on the market. If you have some big land subdivisons and there\u2019s going to be a flood of new lots coming on the market or some big apartment releases, there are going to be hundreds of new apartments flooding your market in a particular suburb, then that\u2019s going to have a direct impact on prices in that market and it\u2019s going to soften. There\u2019s no doubt that will happen.<br \/>\nMy advice to buyers: buy in tightly held markets at fair market value, do incredible research, but don\u2019t just be misled by median prices.<br \/>\n<strong>Kevin:<\/strong>\u00a0 Good comment from Rich Harvey. Rich is from the Real Estate Buyer\u2019s Agents Association of Australia. He is their president.<br \/>\nGood on you, Rich. Nice talking to you, mate.<br \/>\n<strong>Rich:<\/strong>\u00a0 Thank you, Kevin. Always a pleasure.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Australia\u2019s largest body of professional buyer\u2019s agents is warning property buyers not to make their purchasing decisions based on median house price values alone. This has long been a beef of mine and I talk to Rich Harvey about why it is a mistake to&#8230;<\/p>\n","protected":false},"author":176692471,"featured_media":20221,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[32,10,11,13,36,22,25,27],"tags":[101],"class_list":["post-20220","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying-a-property-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment-topic","category-research-topic","category-sponsored-channels","category-trends-topic","tag-podcast"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Don\u2019t get hung up on median prices \u2013 Rich Harvey - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/dont-get-hung-up-on-median-prices-rich-harvey\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Don\u2019t get hung up on median prices \u2013 Rich Harvey - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"Australia\u2019s largest body of professional buyer\u2019s agents is warning property buyers not to make their purchasing decisions based on median house price values alone. 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