All Topics / General Property / The Folly of Median House Prices

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  • Profile photo of DerekDerek
    Join Date: 2004
    Post Count: 3,544

    Median price changes are often quoted in the press and I am sure some property investors use them as a guide for their investment decisions.

    Just to highlight how flawed this data can be – I was reading the WA Property report in Sunday's paper. Ardross was listed as the best performing suburb in the south of Perth with a price increase of 8.7% over the previous 12 months.

    8.7% increase was based on 29 sales. What the report did not mention was 29 sales represents approximately 2% of all properties in Ardross.

    Out of interest Derby was listed as the highest growth area in WA over the last 12 months with growth of 90.3%. Yes that is right 90.3%.

    This figure was based on 16 sales which represents 1.7% of the total Derby market.

    So message is use median prices with care.

    Profile photo of BMWBMW
    Join Date: 2012
    Post Count: 25

    Yep, I was looking at property online in Dunedoo, a small town in central west NSW.

    Was surprised the medium price was $220 000. Seemed a bit expensive, until I realised it was based on only one sale.

    Profile photo of Scott No MatesScott No Mates
    Join Date: 2005
    Post Count: 3,856

    Even if there are a large number of sales there is always the risk that the median has been
    skewed by new developments dumping better than average properties into the mix.

    Profile photo of Andrew_AAndrew_A
    Join Date: 2003
    Post Count: 392

    Yes medians are to be used with care if at all, same with a lot of data, historic growth rates is another I see used and abused often with the unspoken assumption usually being suburbs with higher rates will make better choices in the present.

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