Understanding differences in property market data  

Wednesday, 19th Dec 2018

Property market data can be fundamental to our understanding of the movements of different real estate markets. The various types and sources of data can give savvy investors greater and more accurate insight into market trends, and more importantly provide the market intelligence they need to better decipher how the market is actually performing and how it is likely to perform in future.

However, whilst data can be a useful resource for buyers when searching for investment opportunities and analysing a market’s potential, reading trends in market data isn’t always straightforward. With different agencies and sources often providing conflicting figures and reports, it can be difficult to comprehensively understand how and what to make of the data.  So how can we look beyond headline statistics, and how can savvy investors interpret and generate the insights they need to make better informed investment decisions?

Explaining data differences

Property market research

Market analysis is one of the most important steps in identifying potential investment opportunities, and we’re lucky enough in Australia to be able to leverage a number of resources to access the latest data from different property markets. However, whilst well-known research houses such as REIWA and Core Logic provide their own research reports and commentary on the movements of the property market, it’s not uncommon for these different research companies to present conflicting figures when reporting on key statistics such as median house prices or price growth in a given area.

These differences don’t necessarily mean one provider is wrong, rather they essentially come down to the different methods each research house employs to produce their commentary, each of which will provide different results and take into account varying factors when measuring shifts across the property market. As an investor, there a few key tips to keep in mind when interpreting these statistics and making sense of data differences.

Reading property market data – key tips

Don’t read data without context

Whilst data can be a useful tool in guiding investors through their investment property research, statistics alone don’t always tell the full story when it comes to property market movements. As an investor, it’s important to not only look at the figures when analysing data, but also to understand the wider context behind these statistics, in turn considering any trends or bias that may be influencing the results in a specific way. If, for example, a suburb has witnessed a sudden increase in sales of more expensive properties, this may result in an increase in median house price, leading buyers to believe the suburb has experienced substantial growth. Whilst this data wouldn’t be wrong, the increase in overall house price wouldn’t necessarily reflect all properties within that area, and the results would likely be skewed by the composition of sales. For this reason, it’s often better to view data such as median house price over a longer period of time to monitor long-term trends in a specific area rather than a shorter period of time in isolation.

Use complementary data sources

In order to gain the wider context required to fully understand data results, it’s important to use property market statistics in conjunction with complementary data sources. By pairing statistics such as median house prices with additional insights such as the composition of sales and buyer types in the market, you can start to build a wider and more accurate picture of why certain trends are arising in specific areas, in turn identifying any anomalies that may result in misleading figures.

Don’t apply headline figures to the whole market 

When analysing property market data, buyers will often look at statistics such as median house price as an indication of the general condition of the overall market, and it’s often these headline figures that will be cited in the wider media. However, just as data doesn’t necessarily reflect the movements of all properties within a suburb, it’s important to recognise that these overall figures don’t always accurately represent the direction of the market as a whole.

Even within one state, different sub-sections of the property market will often experience price growth at different times, and an overall decline in median house price doesn’t necessarily mean all areas within that market are experiencing a downturn. This has been seen in Perth in recent months with the emergence of the two-speed market, with many inner-city areas recording price growth despite an overall decline in median house price. As an investor, it’s important not to rely on headline figures as the sole indication of where a market is moving,  and instead consider the movements of sub-sections within the market when analysing market trends and searching for potential growth opportunities.

By adopting this more detailed and in-depth approach to interpreting market data, investors can often  identify opportunities that many buyers overlook by not reading further into market statistics and looking beyond market headlines. Whilst this can be crucial for savvy investors seeking to take advantage of early opportunities in recovering markets and maximise the long-term growth potential of their portfolio, this approach can also be crucial to mitigating key investment risks and identifying potential warning signs that other buyers might miss.

Momentum Wealth is a research-driven property investment consultancy dedicated to helping investors accelerate their wealth through property. If you are seeking more advice on Perth’s property market or would like to discuss your property needs with one of our industry experts, contact us to organise an obligation-free consultation.