05 Oct The missing ingredient in property research – Michael Yardney
If you’re like most property investors, you’re inundated with housing price data.
Each Monday you’re likley to look at the auction clearance rates, at the end of each month you’re probably checking the housing indexes and at times you’ll dig deeper to see what’s happening not only in your state, but in a particular suburb.
But how accurate is all this data?
Clearly the more accurate it is, the more informed your research will be.
Yet a recent article in the Australian Financial Review questioned the accuracy of the various data research houses and showed some glaring inconsistencies.
Look at the difference:
The AFR gave the example of recently reported data where the Australian Bureau of Statistics reported housing prices across Australia (the weighted average of capital city performance) rose 4.1 per cent in the June quarter from a year earlier.
Yet in July, when CoreLogic put out its equivalent numbers, it gave a figure of 8.3 per cent – more than double the ABS number.
It turned out Corelogic had tweaked its hedonic model to adjust the way it accounted for extremely high- and low-priced property sales.
Domain, which doesn’t give one figure for the housing market overall, painted a different picture yet again, suggesting a 2.7 per cent rise in houses and only a 0.1 per cent gain for units.
Source: Australian Financial Review
And the results are even more diverse if you look at reported price growth for individual cities.
Let’s take Sydney for example.
- The A.B.S report Sydney prices rising 3.6 per cent in the year to June, with houses up 3.7 per cent and units 3.2 per cent.
- Domain reports Sydney houses increased 1.2 per cent and units just 0.4 per cent.
- CoreLogic reports an 11.3 per cent rise for Sydney overall, with houses shooting up 11 per cent and units 12.8 per cent.
It’s not easy
Clearly it’s not easy to accurately report what’s happening to property.
That’s because dwellings aren’t a homogenous product like cars or washing machines – every house is different and every buyer and seller has a different agenda or set of priorities that guide their behaviour.
In other words every proeprty is different and the price paid for them is the result of irrational human beings making emotional decisions.
However, with property being the nation’s biggest asset class it’s important for purchasers to have an understanding of what’s really going on.
Yet following interactive infographic traffic from the Australian Financial Review shows how different the reporting is – just click below check your state to see what’s going on:
So what is a property investor meant to do?
I know at Metropole we assess the various house price indexes including those produced by the Reserve Bank of Australia (which created its own house-price index) as well as A.B.S data.
Both these indexes lag those of private sector providers CoreLogic and APM/Domain.
We also assess the Asking Price Index produced on a suburb by suburb level by SQM Research.
SQM managing director Louis Christopher believes that:
“If you need a timely index, asking prices are the best as opposed to a prices index we know is lagging.”
But all this is looking into the rear vision mirror – what’s happened in the past.
The quality of our research and the results we’ve achieved for ourselves and our clients at Metropole has increased considerably over the last 15 years when we changed the focus of our methodology to looking forward rather than backwards.
So we also research growth drivers, in particular economic growth drivers that lead to jobs growth, which leads to employment growth and wages growth, which both lead to population growth which leads to demand for housing.
We also assess the supply and demand ratio, changing demographics and infrastructure development.
But many investors aren’t aware of…
The missing ingredient in property research:
While it’s easy for homebuyers and property investors to do much of their research online today, there is one thing that is missing.
And this is the missing ingredient in most property research: PERSPECTIVE
While you can become knowledgeable through online research, you can’t gain experience and perspective without being on the ground and having years of intimate knowledge of why one street in a particular suburb performs better than another.
Or why one side of the street has more appeal than the other or about the developments, demographics or disappointments that will affect property values in a particular location.
That’s why our buyer’s agents of Metropole have gained years of experience selling real estate in a particular location before we employ them to buy properties for our clients.
And that’s why we have our own teams based in and living in the 3 major capital cities of Australia.
You can’t gain perspective by flying interstate, inspecting 15 properties, making three offers and flying out – but that’s what many other buyers’ agents are doing at present.
And an investor can’t gain this level of experience without doing multiple deals.
So why try doing it on your own?
Professional advice is not expensive, it’s an investment.
Making the common investment mistakes we see not only beginners, but experienced investors, make every day is much more expensive than paying a property strategist to devise a strategy for your personal needs and then allowing their team of buyers agents to help you.
So here’s what you can do:
If you’re looking for independent advice, no one can help you quite like the independent property investment strategists at Metropole.
Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is unbiased.
Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.
Please click here to organise a time for a chat. Or call us on 1300 20 30 30.
When you attend our offices in Melbourne, Sydney or Brisbane you will receive a free copy of my latest 2 x DVD program Building Wealth through Property Investment in the new Economy valued at $49.
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