Home

User's Guide To Property Data

1. In fact in most Australian cities only a small minority of properties are sold via auction In Melbourne and Sydney the proportion is higher especially in inner ring suburbs The clearance rates data tends to have a relatively small sample size and bounces around from week to week API publishes monthly data which has a larger sample size Bell explains that APM has a team of workers collecting its auction clearance rates data each weekend By far the majority of auctions are conducted on a Saturday We have a group of employees in here on a Saturday literally calling real estate agents across all states We ve got a list of properties listed for auction and then we collect as many results as we can on a Saturday he says This tells you how many properties were listed for auction how many were auctioned and how many were sold including the average price Sales are continued to be collected for the next few days and throughout the week so then we get a more final number Bell says He s looked at how the numbers released on a Saturday night compare to the final data a year later once everything has flowed through all the official channels The review isn t much The clearance rates might change by one per cent or two per cent particularly in Sydney so there s not a lot of review which leads me to believe those preliminary numbers that come out on a Saturday evening are very very accurate and that they won
2. Investors can get access to both free and paid automated valuations for their properties RP Data http bit ly owXJhE APM http bit ly aErRHG and Residex http bit ly oMNiHc offer paid reports that include price estimates based on their own AVMs A Residex operated website called Find Me A Home http bit ly oNCZOg offers price estimates for properties across the nation based partly on information the user puts in about the condition of the property The estimates are available for free although visitors must register to download them Residex warns the valuations on this site are provided as general guidance only WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 26 Location Although it mightn t exactly qualify as property data there s a wide array of information available about the location of a particular property which investors can utilise without leaving the comfort of their home or Office Australia s major property portals realestate com au and domain com au both offer satellite mapping built into their sites now For those who haven t already used it Google Street View http bit ly 39palZ is a free service from the global search giant that takes things a step further allowing users to essentially walk down almost any street in Australia and inspect properties from the outside The photos are snapped usi
3. Jeremy Sheppard of Mustard Solutions If you can come up with a way of analysing supply and demand you can confirm or deny what you believe about a location s future growth prospects When demand for property is high and supply is low prices go up It s a well known law of economics In fact nothing else affects prices only supply and demand Most experts will tell you that in order to get capital growth you should search for areas close to schools and shops with good transport preferably with water views and close to the CBD in a suburb with a caf culture emerging businesses entertainment venues hospitals universities parks character housing and the list goes on These types of locations should definitely be in demand from buyers But there are two shortcomings with this kind of advice E No objectivity in determining the level of demand and I No consideration of the other side of the equation supply If there s an oversupply of property prices will fall So investors should perform research to also determine the supply characteristics of an area You should consider both sides of the equation In other words you should know the demand to supply ratio DSR With regard to objectivity it s no good simply saying Properties are in demand in suburb XYZ and there s not much supply How much are they in demand How limited is the supply Is suburb XYZ better than suburb ABC You need to be calculated in
4. always a positive sign for a local property market Strong population growth we don t view that as an indicator of strong capital growth It s actually an indicator of supply If you ve got the population growing at 10 per cent or 15 per cent per annum which is five to 10 times the national average that s a sign that there s a lot of available real estate in that area and it s a sign of actually potentially low or volatile capital growth Lomas on the other hand believes population growth above the national average is one indicator to look for in a good investment location Population growth is more important than size but again and like all data one stat must then be considered in light of other information she says Why is it growing Are the drivers of this growth sustainable or one off Where to find population data The ABS provides population size data for locations around the country including suburbs local council areas Statistical districts and cities To find ABS figures on population size in a given location use the 2006 Census data by location search tool available via http bit ly djG9UU The ABS population projections and much more can be found via its Population trends and estimates page available via http bit ly 9LImSA SQM Research s free demographic data search tool includes annualised population change statistics for postcodes around the country as w
5. are definitely limits to how much a figure like population size or population growth can tell you about the market Those big demographic things were still looking positive even when house prices fell in the GFC in Australia by about five per cent so they can t overcome some short term ructions in the market but as a medium and long term predictor think they re very good and track them very closely Bell says On a suburb level Bell believes population growth would be a figure worth looking at At a very simple level would think that if a postcode had projected population growth well above the rest of the city then that would be a very good indicator about the demand for property and taking into account whether there s enough new properties being built WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 18 The smaller the population base the higher potential for a more volatile market due to fluctuations in demand You could easily get from that a pretty accurate view of whether property prices rents and rental yields in that area are going to go up or down Population size Armstrong says flows through to stability in demand in the market The smaller the population base the higher potential for a more volatile market due to fluctuations in demand he says But he s not convinced strong population growth is
6. around the country SQM s graphs include 2006 figures alongside projections for 2011 and 2016 it s available via http bit ly bxxzsr Rental vacancy rates Rental vacancy rates are a vital tool for property investors Wakelin says as they provide a reliable insight into the balance of supply and demand for rental property They therefore provide a guide to how difficult it might be to find a tenant to fill an investment property Queensland property analyst Michael Matusik says rental vacancy rates have by far the biggest impact on growth in rental rates adding it s a myth that higher interest rates lead to rising rents Despite what some property commentators seem to think landlords don t have target yields that need to be met and even if they did they re not able to simply flick a switch and increase rents says Matusik from Matusik Property Insights Most landlords and property managers are rational operators and won t risk a vacant property by lifting rents Bell confirms that rental vacancy rates provide good information for investors If there s a low vacancy rate then that s a pretty good indication that there s not going to be any real weakness in the rental market and that rental growth is going to remain strong he says WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 13 Lomas suggests investors use vacanc
7. consider the fundamental drivers of price growth The point is they re not quantitative in nature They re dependent on the investor s feel for demand and supply in the area You can get around this problem to some extent by giving a score between one and 10 for each fundamental supply and demand characteristic And then rank the characteristics in terms of importance See Table 1 for an example Table 1 Supply and demand characteristics Demand characteristics Score out of 10 Importance out of 10 Value Water views 0 9 0 Shopping 6 8 48 Schools 4 7 28 Public transport 5 7 35 Restaurants clubs and bars 6 8 48 Parks 4 6 24 Etc Total 33 183 Supply characteristics Score out of 10 Importance out of 10 Value Building activity 3 7 21 Development applications 4 5 20 Blocks of vacant land 1 9 9 Etc Total 10 62 DSR 2 95 The demand characteristic is multiplied by its importance factor and similarly with the supply characteristics Then the total demand 183 in the example is divided by the total supply 62 to get the DSR 2 95 If you follow this procedure consistently for a number of locations you ll begin to know what a good fundamental DSR is and what a bad one is WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 29 Although this method is still rather subjective it pro
8. re getting a good deal Herron Todd White valuer Kieran Clair says lenders demand that comparable sales are no more than six months old and preferably within three months of the valuation being carried out Clair says he ll start a search for comparable sales within a 500 metre radius of the target property and then move further out if necessary Lenders prefer to see sales within 10 per cent of the assessed value of the target property so it s important to look at truly comparable property Clair adds Clair says six comparable sales will generally provide a clear picture of a property s value You look at six and you can usually give less weight to one or two of them because they ll appear out of line he notes With a bit of research you can usually discover that it might have been a distressed vendor or something similar Comparable sales are also what Monique Wakelin was talking about when she mentioned monitoring sales results and auctions results in newspapers She says recent sales in a suburb are the best way to get a sense of what s happening in the market as they re not a historical measure in the way that median prices are You re comparing immediate data she notes It s not months old it s not six weeks old or four weeks old It s a day old and that s why it s reliable It s vitally important for investors to look at comparable sales Armstrong says but he warns people n
9. that sort of stuff won t be known for months after the event when the official data flows through to the valuers general he notes On an individual property level it can be useful for investors to know what the initial asking price of a property was and whether there have been any price discounts before they came across the marketing for the property If the marketing agent is tight lipped on these matters there are a number of online tools that can help identify the level of discounting on a given property Where to find vendor discounting data API publishes the average private treaty discount being recorded each month in Adelaide Brisbane Canberra the Gold Coast Melbourne Newcastle Perth and Sydney The figures sourced from APM are included in the Databank section at the back of each issue of the magazine WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 17 APM also makes suburb specific data on the level of discounting on an annual basis via the suburb search tool on its Home Price Guide website http bit ly owXEzb Domain also provides vendor discounting details via its suburb profiles search http bit ly duqkjx For individual properties the Refinder website http bit ly cdxfWC tracks the real estate advertising history of properties available on a number of different Australian property portals displaying the history of
10. the Census The vacancy rate is then calculated by dividing the number of vacant rental properties by the total number of rental properties in each postcode Where to find vacancy rates data API publishes vacancy rates in its Databank section each month as noted SQM Research which provides API s data also offers a free online search tool allowing investors to view vacancy rates data for individual postcodes over time http bit ly bxxzsr The state and territory Real Estate Institutes also collect rental vacancy rate data for their own jurisdictions and some of them make this information freely available online Search online for real estate institute and the state or territory you re interested in Auction clearance rates Matthew Bell says auction clearance rates which reveal the proportion of properties listed for auction that sold successfully provide an excellent guide to the health of Australia s biggest property markets particularly those where the auction is a more popular form of selling property My view is that the clearance rates are a very good indication of how the market s going Bell says If look back at a chart of auction clearance rates versus how prices did move when that data WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 14 eventually comes through the correlation is amazing That s why i
11. useful for analysing the health of a property market He rates them as leading indicators because compared to median prices which are a measure of how a market stood at some point in the past these statistics can provide some insight into where a market is headed As well as being a broader measure useful for analysing a particular property market at a more granular level the number of days an individual property has been for sale can also provide an indication to a buyer of the level of demand for that particular property If a property has been on the market for a long time it may suggest the vendor will be getting desperate providing the opportunity for tough negotiation on price and allowing the buyer to get a better deal However Armstrong warns this isn t always the case You could also be looking at a really compromised and dud asset which could be equally as true he notes Where to find days on market data API provides days on market data for Adelaide Brisbane Canberra the Gold Coast Melbourne Newcastle Perth and Sydney in each issue of the magazine located in the Databank section It also provides average days on market for thousands of suburbs around the country in the Market Watch section The free searchable suburb profiles provided by property portal Domain http bit ly duqkjx include days on market statistics for individual suburbs and regions around the country Just search for your postcode o
12. your reckoning Ideally you d want a number for the DSR for a location If you can come up with a value for the DSR for an area then you know the level of pressure on property prices in that area To come up with a DSR figure you need figures for demand and you need figures for supply Then you divide the demand figures by the supply figures and there s your DSR The higher the DSR the bigger the future growth will be And conversely the lower the DSR the bigger the fall will be There are two approaches to getting demand and supply information guesstimates and statistics Both are notorious liars so you ll need to be careful in how you go about analysing the data Guesstimates aka fundamentals is the method investors use most commonly It s a case of observing WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 28 fundamental characteristics of a location For example you notice various demand characteristics such as caf s opening on every corner local businesses hiring more staff a new school is being built etc Similarly you may get an idea of supply characteristics by checking what development plans have been lodged with the local council recently or whether there are many vacant blocks available in the area etc call them guesstimates because they have no objective figure They can also be called fundamentals because they
13. API eREPORT Users Guide To Property Data Propertylnvestor AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 1 Investors have access to reams of data about Australia s property markets But what does it all mean and how can investors use it to maximise their financial success BY MATTHEW LIDDY There s a plethora of statistics available about Australia s property scene Median house prices median advertised rents indicative gross yields rental vacancy rates days on market auction clearance rates and the list goes on But do you understand what all these numbers mean and how they should influence your investing Many investors find the lingo of property data too confusing others are puzzled by the statistics sometimes contradictory nature The first rule about pretty much all the property statistics available is to use them as a guidebook not a rulebook None of the data is perfect A median price doesn t represent every property in a suburb Auction clearance rates might represent the health of a particular segment of the market but they don t tell you why some properties are selling when others aren t That s not to say that studying the data isn t useful for property investors It s just that investors need to go one step further before making a purchase by doing a little shoe leather research the kind that involves getting out and about to investigate a local market A
14. DATA 32 Putting it all together By now you should have eight statistics We now need to combine them in a way to calculate a single DSR estimate You just need to be careful how you combine these to get a single figure Because statistics can be big liars some of the figures could be extreme in some suburbs some of the time These anomalies need to be treated carefully so the DSR value isn t skewed too much from one bad statistic Table 2 Calculating DSR values Peete o e era Vacancy rate Rental availability Online search demand to supply Total In this example there aren t enough ticks to consider this suburb as having a good statistical demand to supply ratio The fundamentals may be good though Another option might be to have a range of values for each statistic For example very good good normal bad or very bad You might also like to apply a scaling factor giving more credit to statistics you consider to be more important Jeremy Sheppard is author of How to find property hot spots and founder of Mustard Solutions www mustardsolutions com au WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS
15. NVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA and unit prices at a capital city level These data houses include APM RP Data Residex and the Australian Bureau of Statistics Each of these providers has different methodologies each with their own strengths and weaknesses However generally speaking they show price trends over the longer term in a similar light Despite the biases and time lag involved Bell says medians remain a good resource It s useful and it can give a good direction about how prices are moving but it s important for investors to get on the ground and look at things like the actual recent sales he says That will give people an idea of whether those median prices have been affected by a lot of expensive sales or a lot of affordable sales and they can look at properties of the same type as the one they re interested in Lawless agrees that median prices have their place even though they might bounce around a little bit They do provide a pretty good level of relativity in the market in terms of what prices are being paid in a particular market in a particular timeframe he says Joye also says medians remain useful The median is useful if you want to simply know what the middle sales observation in say Melbourne was over the past say quarter he says This gives you a quick and easy to understand guide for the price of the homes being purch
16. T USER S GUIDE TO PROPERTY DATA 12 2006 To calculate the ratio of available stock to the total dwelling count divide the stock on market figure by the total established stock figure and then multiply by 100 to obtain a percentage If you see there s say 80 per cent of stock on the market that ll set a few alarm bells off Lawless says For our example of Alawa and postcode 0810 the ABS shows there are 11 299 total private dwellings in the postcode Thus the ratio of stock on market to total established stock in January 2010 is calculated in the following manner 72 houses on the market plus 49 units on the market equals 121 total dwellings on the market divided by 11 299 total private dwellings multiplied by 100 equals approximately 1 1 per cent It s safe to say having 1 1 per cent of stock on the market won t set any alarm bells ringing about Alawa though the figure wouldn t have to reach the 80 per cent mark Lawless mentions before investors might want to think heavily about any investments in an area Where to find stock on market data As noted API publishes stock on market data every month towards the back of each issue To find ABS figures on total established dwellings in a given location use the 2006 Census data by location search tool available via http bit ly djGQUU Alternatively SQM Research s free demographic data search tool includes information on total established dwellings for postcodes
17. ased in the market Median prices are also useful when seeking to address research questions that are targeted at identifying a representative price at any particular point in time The median is useful if you want to simply know what the middle sales observation in say Melbourne was over the past say quarter Where to find median price data As mentioned earlier API features median house and unit prices for suburbs around the country in its Databank section at the back of each month s magazine Investors can also find free median price information online APM offers a free property research tool to look up median house and unit prices around the country via the Home Price Guide website http bit ly owXEzb Research house RP Data http bit ly dcVQrO and property portal Domain http bit ly duqkjx also offer free suburb profiles which include median price data The state and territory Real Estate Institutes each collate median price data in their jurisdictions some make this data available freely online Search online for real estate institute and the state or WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT 10 COMMON PROPERTY INVESTMENT MISTAKES 5 territory you re interested in The Commonwealth Bank offers a free property value guide online based only off transactions it s involved in financing http bit ly dh1 WHF Median price gro
18. asking prices The Old Listings website http bit ly blxArl can also help if a property was previously advertised with a different agency as it keeps a record of previous listings via online property portals SQM Research http bit ly m19r also sells Home Discounts Reports which identify properties in a given postcode that have been listed for two months or more and then display the initial asking price alongside the current asking price Population In terms of population there are two important statistics for property investors to examine population size and population growth The size of the population in a given suburb town or city will provide an indication of what types of services you could expect nearby as well as how big the pool of potential tenants you re drawing from is Population growth gives an indication of whether an area is prospering whether its economy is going forward or struggling and whether demand for housing is growing Matthew Bell says population data is very important for longer term views of the property market especially in terms of Australia wide or city wide prices They re things that don t change quickly either which is why guess my outlook is generally positive because while we ve got that strong population growth not enough houses being built strong income growth and all those sorts of things it s really hard to see property falling across the market However there
19. atch section each edition Returning to our example suburb Alawa in the NT if you take the median advertised rental figure of 475 and the median house price of 470 000 and follow the rental yield calculation outlined earlier you arrive at an indicative gross rental yield of 5 3 per cent This would be considered a relatively strong rental return compared to many parts of the country Given that calculating median rental yields uses two sets of data median prices and median rents that we know have some in built biases it s clear that the yields presented are best treated as an indicator of yields in the suburb Investors shouldn t assume that all properties in the suburb will provide similar returns because it s simply not realistic However Bell says investors shouldn t ignore the yield data I think yields are very important for investors to look at because they typically move around less than prices and rents simply because it s a combination of both of them he says It takes quarters or months and months and months for yields to move significantly so if an area s got a decent yield relative to the rest of the city or the rest of the country then it s probably not going to change in a short period of time Where to find rental yield data As noted API publishes rental yield data for suburbs in the Market Watch section at the back of the magazine Days on market Average days on market statistics a
20. burb is easy to find Turn to the Market Watch pages in the back of API A high rental yield means there s high demand from renters but low supply It represents a high rental DSR But we want high owner DSR High demand from renters doesn t immediately translate to demand from buyers but probably will some time in the not too distant future since a high rental yield usually precedes strong price growth Any yield above five per cent is considered good But each location has its own yield characteristics Expensive suburbs have traditionally low yields Familiarity with a suburb s normal yield will highlight when it s unusually high Vacancy rate A low vacancy rate means that there is either high demand for rental accommodation or low supply or WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 31 both This data can be found for a suburb from the back of API A three per cent vacancy rate is considered a normal vacancy rate Four per cent and above should trigger alarm bells Two per cent is a tight market and one per cent or lower means there s a rental boom due soon Rental availability Ideally you want few properties for rent as a percentage of properties in the suburb A low figure here represents a high proportion of owner occupiers to investors or an undersupply of rental properties The proportion of renters to owners can be obtaine
21. d from websites like the Domain suburb profile mentioned earlier Approximately 30 per cent of property owners are investors So if there are less than 30 per cent renters in a suburb that s generally good Online search demand to advertised supply At the time of writing this can only be found on the www realestate com au website It shows the number of searches performed on their website compared to the number of properties available Click on the Suburb Data menu on the left of the realestate com au homepage and select a state and suburb If you scroll down you ll see something like chart 1 The blue line shows the change in the number of advertised properties in the suburb of interest The green line shows the number of people looking for properties in that suburb Note that because of scaling on the axes the lines will always be relatively close to each other So Chart 1 30 300 20 200 10 Advertised properties Supply 100 People looking Demand 0 0 Jun 09 Jul 09 Aug 09 Sep 09 Oct 09 ignore the lines and focus on the figures In the above example there were 300 searches for property and 30 properties listed This is about a 10 1 ratio of searchers demand to advertised properties supply A 10 1 ratio is low demand High demand would be a 30 1 ratio or higher WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY
22. d what might be in demand from local residents Property ownership status The ABS collates data on what proportion of residential properties in each suburb are fully owned what proportion are being purchased and what proportion are rented It also reveals the mix of public and private rental housing This sort of data can again give investors guidance on what type of market they re buying into Lomas says this kind of demographic data is most helpful in allowing investors to choose a property type that s most likely to be in demand by the available renters For example lots of families dictate the need to buy a house but lots of couples perhaps a unit she says Armstrong says some of the detailed breakdowns of dwelling characteristics are particularly useful WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 20 You can really break down any suburb around the country and work out what is the percentage of home ownership or investor ownership and also out of the homeowners how many of them have debt on their properties and how many own their properties outright he explains That gives us a really good clear indication of stability in pricing when interest rates go up If a high proportion of the population holds properties with no debt then that location will remain more solid when interest rates rise he sug
23. data takes a while to flow through he explains This makes median prices a historical measure it takes time to collate all the prices being paid for property and put together a dataset that provides a reliable median price Thus most median price measures are at least three months old before they re available for publication API readers are probably most familiar with the median price data presented in the Databank section at the back of each month s issue The median prices presented there cover a 12 month period In the April 2010 issue API presents data for the 12 months to 31 December 2009 meaning the medians are a representation of all the sales between January 1 2009 and December 31 2009 If there are fewer than 10 sales in a suburb during the given 12 month period then that suburb s median price is considered statistically not reliable and it s excluded from the results APPs data is sourced from APM which gets access to sales data from the Valuer General s office in each state and territory as well as directly from real estate agents Take the data published in April 2010 for houses in Alawa in the Northern Territory as an example Alawa is the first suburb listed in the NT houses data section on page 129 of the April 2010 issue The data shows APM has tracked 39 house sales in Alawa over the 12 months to December 31 2009 The median price recorded is 470 000 meaning that if you listed the 39 sales f
24. dian rents are much the same as median prices in that investors should use them as a long term guide only APPs Market Watch section published each month provides median advertised weekly rental rates for thousands of suburbs across the nation provided by APM The median rent in a suburb is the mid point of all advertised rents in the given suburb over the stated 12 month timeframe Returning to our earlier example of Alawa in the NT the April 2010 data shows a median rental value of 475 over the 12 month period ending on December 31 2009 That s 11 6 per cent higher than for the corresponding period ending on December 31 2008 APM research assistant Clinton McNabb explains that all rental information is based on advertised rents the company collects online Only the most recent advertised rent amount is used to reflect as close to the rental amount as possible he says All APM data are validated against GNAF Geocoded National Address File and de duplicated as we often collect the same data from various sources All agents reported data are also washed against the Valuer General s results which arrive at least eight weeks after The median rent in a suburb won t tell you what a top end property will rent for nor a low end property Where to find median rents As noted API publishes median rents for thousands of suburbs in the Market Watch section towards the back of each issue of the magazine The governme
25. e Investors shouldn t rely solely on past median price growth when deciding where to invest as past results don t guarantee an area will continue to experience capital growth Median price growth is rather best used as a starting point for research on where to invest and what to buy It s never the replacement for solid due diligence and on the ground research Where to find price growth data As noted API publishes data for annual and 10 year changes in median prices in the Market Watch section at the back of each issue Investors can also find free statistics on price changes via the same websites outlined earlier for median price data Median rental values Median rents are designed to provide an indication of rentals for properties in a particular location WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 8 They work in a very similar manner to median prices except they re covering a different data set rentals rather than sales As you d expect they suffer from many of the same biases as median sale prices However Bell notes they re typically collected more quickly so the time lag factor isn t always as severe The median rent in a suburb won t tell you what a top end property will rent for nor a low end property though it should give a hint at what a typical property might fetch in the rental market Monique Wakelin says me
26. eed to make sure the sales truly are comparable by having physically inspected those properties themselves You can look at a photo and say they look similar but does it need restumping out the back and was the other one all renovated and how big was it and how much natural light was there Photos can be photoshopped doctored You ve got to actually go in and physically experience the properties to work out if it is a true comprable Matthew Bell confirms that examining comparable sales is particularly important for investors He says even if investors have to pay to get a comparable sales report they d find it s money well spent WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 22 When I look at property and when other investors look at property it s such a small cost compared to what you may or may not pay in the market Such reports typically provide photos and all the data about each property sold over the past 12 months or 24 months If you can t get a good idea about how the market is moving and what the level of sales is from comparable sales reports then there s not much else that s going to help you Bell says And they re objective as well It s good to talk to agents and get their view but they ve got a bit of a vested interest as well whereas these reports are government reported data Where
27. ell as projections on population growth to 2016 The tool is available via http bit ly bxxzsr Demographics The ABS Census data contains extensive demographic information about suburbs and cities across Australia including details on the age of local residents their family characteristics occupation and income monthly loan repayments dwelling types and property ownership status WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 19 All of this data can be useful for property investors who might want to know as much as possible about the local population so as to understand who their potential tenants are and what sort of property they might be interested in Following is a brief rundown of the types of demographic data available from the ABS and a simple illustration of what it might tell investors about a particular market Age Census data reveals what proportion of residents are within certain age groups with the youngest being zero to four years and the oldest being 65 years and older If there are a lot of younger residents perhaps a share house type rental would be attractive or if there are a lot of children perhaps your rental should be targeted at families Family characteristics Investors can discover what proportion of the population are represented by family groups such as couple families with children couple famili
28. es without children and one parent families It also includes information on how many people are living in family households as opposed to lone person households and group households As Lomas suggests earlier this may provide an indication of the type of property house or unit most likely to be in demand Occupation and income Investors can discover which industries are the major employers in the area what occupational category most workers fall into eg professionals managers clerical and administrative workers technicians and trades workers sales workers labourers and what proportion of the population is in full time or part time employment The ABS also reveals the median individual income median household income and median family income This sort of data may allow investors to target their investment properties at a particular segment of the population especially if one group dominates in a given location Monthly loan repayments The ABS provides the median housing loan repayment per month among mortgage holders which could give investors an indication of what residents might be able to afford in terms of paying for housing Dwelling types Investors can find out how many residential properties there are in a given suburb or city and what percentage of those dwellings are separate houses semi detached houses and units This will give an indication of what sorts of property are typical in the area an
29. gests Armstrong also believes the proportion of owners versus renters in a suburb provides a useful insight for investors If we re looking at good safe growth markets then we like to see an even balance between owners and tenants he notes The reason for that is they tend to work counter cyclically When investors are very active in the market homeowners aren t and when homeowners are very active in the market investors aren t So if you ve got strong demand from homeowners and strong demand from investors it means that regardless of where we are in the market cycle one of those two groups is putting pressure on values A very high proportion of either investors or homeowners is an indicator of volatility in that market because when one sector drops out there s no support from the other sector to come in and underpin it he adds Where to find demographic data The ABS provides all this demographic data for locations around the country including suburbs local council areas statistical districts and cities To find ABS figures on population size in a given location use the 2006 Census data by location search tool available via http bit ly djG9UU The results provide information about the selected region as well as a comparison to the Australian average which is useful for investors so they can see how the selected area compares with the rest of the country Real estate portal domain com au al
30. han cheaper ones In general if a property spends 50 days or fewer on the market would consider that to be a hot market With 100 days or more I d consider that a cold market Vendor discount This is the average difference between the original listing price and the eventual selling price for properties in a suburb A low discount figure shows strong demand from buyers to meet the price of the sellers The buyers are more easily meeting the expectations of sellers The sellers are in control and there s less opportunity for negotiation on price This figure can be found from the suburb profile on the Domain website http bit ly duqkjx Click on Property Reports then enter a suburb for the Suburb Profile and click search Scroll down to the property prices for houses and units just under the map of the suburb There s a line labelled Discounting Check the figures for both houses and units A discount of around four per cent or lower is considered a sellers market with high demand in my opinion A discount of eight per cent or more is a buyer s market low demand WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 30 Auction clearance rates This is the percentage of auctions that result in a sale A sale at auction is more likely to occur when there s high demand and low supply This figure can be found from the Domai
31. he first is data designed to provide an insight into the health of an entire property market be it at national state or suburb level The second is data designed for use when making individual investment decisions The data presented in this guide is roughly presented in the order of where it sits on the continuum between these two types of figures with the broader market statistics presented first Median prices Median house and unit prices are probably the statistical measure property investors are most familiar with they re also easily misunderstood misinterpreted and misused The median price is a way of measuring typical sale prices for property in a given location It s the middle value of all sales over a given timeframe If for example 11 houses sold in the suburb of Exampletown then if you ranked the sale prices from lowest to highest the sixth sale would provide the median price Medians aren t a perfect reflection of property prices but they re the best measure available Bell says median prices are typically the first thing investors and analysts look at when they re investigating a location WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 3 They re useful but the downside of those is there s a bit of a lag between what s actually happening in the market and being able to see those pricing changes because the
32. ing to come up with an exact figure of land to asset ratio It s an indicator of land to asset ratio Where to find land value data There s no easy way to figure out the land value of property in a particular area It s a matter of tracking recent sales of vacant land and then trying to figure out a value per square metre Investors can find recent land sales in the same way and the same places they find comparable sales as outlined above Automated valuations Automated valuations also known as AVMs standing for automated valuation model provide the estimated market price of a property using comparable sales and statistical modelling These computer generated valuations have essentially been developed as an alternative to having an independent valuer visit a property and conduct a full analysis Many Australian banks financial institutions and mortgage insurers now use automated valuations in WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 25 some situations to reduce costs and speed up their loan approval process Matthew Bell says automated valuations can never make up for a full valuation but do provide a good basic indication of a property s value don t think they can take over for looking at a list of comparable sales or talking to agents he adds However they may be particularly useful for investo
33. ion clearance rates saying they have limited use in analysing the property market They give you an indication of the balance of supply and demand and that s about it Wakelin says And Margaret Lomas is more dismissive still saying that if clearance rates are low it might have just been a stormy day Armstrong says clearance rates do provide an indication of whether a particular market is running hot or is a little weaker but they re not really of importance for individual property selection He adds that attending auctions in your area of interest will provide a better sense of what s going on than looking at statistics telling you what proportion of properties in a given city sold The best way to know what s going on in the market is to actually be at the auctions he says adding that this is the only way to know how many active bidders there were and how strong competition was for the property API published auction clearance rates for seven Australian cities each month The data is sourced from APM which sources information on whether properties sold via auction directly from agents as well as WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 15 from its own monitors who attend auctions and from advertisements Auction clearance rates only provide a limited insight into the property market as not all properties go to auction
34. mium attributes if you find that a lot of waterfront stock is selling it ll bring the median price up and vice versa So in areas that don t have that homogenous housing stock you ll find that the median s going to be a lot more volatile and provide less indications of how prices have actually moved over time Lawless adds Before making an investment decision you really need to be drilling down a little bit further than median prices and actually looking at comparable sales which is probably the real key to understanding what a particular property should be bought for Wakelin says it s best to examine changes in median prices only in annual periods as presented in API Databank rather than quarter to quarter because the quarterly data doesn t smooth out the anomalies I use median values and use annual data to give me a broad long term trend so overall the market is either going up down or sideways Wakelin notes Then use the daily press to say know that one bedroom apartments in Armadale are selling between this price and that price WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA Armstrong also uses median prices for broader research saying it s really good to work out where we are in the broader market cycle and looking at it over the long term But we don t use median data at all
35. n website for the last month of auctions in the same manner as you found the discount earlier The auction clearance rate can also be found for the last week of auctions from the www realestate com au website Click on Auction Results in the left menu As a rough guide a clearance rate of 80 per cent or more is considered high 70 per cent is good and less than 60 per cent is considered low although this varies considerably from city to city Stock on market as percentage of dwellings This is the number of properties currently for sale in a suburb as a percentage of the number of properties in that suburb Not all suburbs are the same size Fifty properties for sale in a suburb may mean a high supply if there are only 1000 properties in the area in total But if there are 20 000 properties in that suburb in total 50 would mean a low supply So we need to calculate the number of properties for sale as a percentage of properties in total A low figure represents an undersupply of properties Either there are few new dwellings being built or the existing ones are tightly held by owners The stock on market figures are also published in the back of API while the total number of properties in a suburb can be found on the ABS website as described earlier in this eReport As a rough guide I d say that anything more than three per cent is a fail and anything less than one per cent is a pass Rental yield The average yield for a su
36. ndicator to tell us what type of asset and what s the likely performance of that asset over time The ideal land to asset ratio will vary depending on what investors want to achieve Armstrong says If we re looking for pure growth investors we re looking at a land to asset ratio of around 60 per cent If we re looking at development sites land to value ratio should be a lot lower You d like to try to get around 10 per cent although for small scale developments that s pretty hard would say somewhere between 10 per cent to 30 per cent for development For cash flow driven investors it depends how much cash flow you re really looking to drive out of it The lower the land to asset ratio the higher the potential yield but on the downside the lower the capital growth When looking at a development site the asset value used in the land to asset ratio calculation is the final value of the finished product Armstrong notes If you ve got a block of land that s worth 500 000 and you re going to build two townhouses and sell them both for 500 000 each the land to asset ratio there is 50 per cent it s too high he says If you got three townhouses on the block of land and they re still worth 500 000 well your land to asset ratio starts to look a little bit better Armstrong says calculating land to asset ratios isn t an exact science but it s a helpful exercise You re not go
37. ng a car equipped with special cameras the car has been driven along most streets in major Australians cities The simplest way to use this service is to visit Google Maps http bit ly aef7IP and search for the property address you re interested in You ll be presented with an overhead satellite map with a small icon pointing to that address Towards the top left hand corner of that map click on the yellow icon representing a man and drag the figure onto the street location outside your target property You ll suddenly find yourself on the street looking at the property you re interested in or maybe the one across the road You can now look around in any direction and use the arrows to walk back and forward along the street This tool allows investors to get a feel for the neighbourhood they re looking at buying in without leaving the comfort of their computer chair Of course it has its limitations You can t hear the road noise or chat to the neighbours or visit the local shops Also the maps and images aren t constantly updated so sometimes if things have changed they ll be out of date Still it can provide a useful snapshot of local conditions Another tool is Google Real Estate http bit ly 4inDH which allows users to search for properties for sale Visit the page listed above and type your suburb of interest into the search box and you ll be presented with a map of properties for sale If you can find your target p
38. ng else that makes a good investment she says Demographic data for instance might be one small part of the equation but Wakelin says she d never buy a property on the basis of that particular kind of statistic alone Property Planning Australia director Mark Armstrong says property data offers valuable insights into the market when it s used correctly But he too warns investors that pure statistics can only go so far A lot of this stuff is broad brush stuff It s a very broad analysis and the only way to really know what to buy is actually get into the market and do that groundwork he says Margaret Lomas author and chair of the Property Investment Professionals of Australia is another analyst who conducts detailed analyses of multiple property markets around the country But she too notes property investment is about much more than data Remember there are 20 must ask questions for every purchase and data is only involved in a couple of them Lomas says referring to one of her books 20 must ask questions for every property investor In other words property data is a powerful tool but it should be wielded with caution and manipulated only by knowledgable educated users To help in that education process API has created a comprehensive guide to what property statistics are available where to find them and what they mean There are essentially two types of data available about the property market T
39. nts in each state and territory also collect an official measure of rental levels in their jurisdiction These may be even more accurate than APM s measure which is based on advertised rents however there s typically a longer lag time before this data is available Some states make median rental reports available to the public These reports are available via the following web addresses E Queensland http bit ly cyCL8 E NSW http bit ly oGXaF1 I Victoria http bit ly o6Nm2T WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 9 Median rental yields The rental yield on a property is the return an investor can expect to receive in rent expressed as a percentage of the purchase price of the property The rental yield on an individual property is calculated by multiplying the weekly rent by 52 for weeks per year dividing that figure by the purchase price of the property and then multiplying the result by 100 to create a percentage The resulting yield is a gross figure meaning it doesn t take into account tax it also doesn t account for any of the additional costs of holding a property Median rental yield statistics put together two of the key pieces of data discussed earlier median prices and median rents to create an indicative rental return figure API publishes median rental yields for thousands of Australian suburbs in its Market W
40. ors in mind when analysing stock on market figures Comparing like for like figures will help minimise the seasonal issue i e comparing January 2010 figures with January 2009 figures rather than comparing January 2010 figures with December 2009 data API publishes stock on market figures for postcodes around the country in its Databank section at the back of the magazine API s data sourced from SQM Research provides annual comparison points which help to minimise the seasonal issues Returning to our example suburb of Alawa in the NT it comes within the postcode 0810 The stock on market data published in April 2010 shows that particular postcode had 71 houses and 53 units available for sale in February 2010 compared to 105 houses and 74 units available for sale in February 2009 This means total stock on market was 30 8 per cent lower in February 2010 than it was in February 2009 Tim Lawless ranks stock on the market as another of his leading indicators for property in a given location He also takes his analysis a step further by comparing the stock on the market to the total number of houses or units in a particular suburb Investors can do the same by finding the total number of established dwellings in a given postcode this is available from the Australian Bureau of Statistics ABS most recent Census data compiled in WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPOR
41. publishes month by month data tracking the average discount for private treaty sales in eight Australian cities every month The percentages displayed represent the difference between the initial advertised asking price of a property and the sold price of the same property This information provides an insight into how wide the gap is between what vendors initially want for their properties and what they re actually able to sell them for Smaller percentages suggest a strong market and realistic vendors while larger figures might be a pointer towards a sluggish market and or unrealistic vendor expectations Lomas suggests this kind of data can prove useful in negotiations as a hint on how hard to negotiate However she notes that a good property won t have the same level of discounting as the average across a suburb or city Bell says data on the level of vendor discounting can provide an indication of whether the market is running hot or cold Level of discounting gives a good indication of the demand in the market It s a bit of a hard one because it s an indication not only of what people are willing to pay but people s expectations as well As well as the data being released on particular cities investors could track discounting themselves on a more local level via real estate agents There will be periods where people are getting what say is a negative discount They re getting more than the asking price But
42. r suburb of interest WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 11 In terms of researching how long an individual property has been on the market this is usually a case of careful monitoring of classified advertising online and in print media However the website Refinder http bit ly cdxfWC attempts to help make this process more accessible providing an indication of how long individual properties have been on the market alongside the history of the price being advertised Stock on market Stock on market as the name suggests provides a measure of how many properties in a given location are being advertised for sale at any one time The number of listings can provide an indication of the health of a property market as a sustained rise in the amount of stock on the market may suggest an oversupply situation is developing with a lot of properties advertised for sale but few willing to buy Conversely a drop in advertised listings could suggest the development of a tighter market Seasonal factors will also come into play For instance listings might be few and far between around Christmas but much more common in spring This isn t necessarily a sign of a tight or oversupplied market but more just a representation of the normal state of affairs given when people choose to sell their properties Investors should therefore keep seasonal fact
43. re a measure of how long it takes to sell property in a given location once it s been advertised WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 10 API publishes days on market data at a suburb level in the Market Watch section at the back of each issue of the magazine as well as listing days on market statistics for eight major Australian cities in its Databank section Looking at our example suburb of Alawa in the April 2010 issue of API we see that the average time it takes to sell a property in that NT suburb is 89 days which most investors might regard as a lengthy period of time APPs days on market data is provided by APM which calculates the average days on market for each of those locations by taking the difference between the date of the initial advertisement for the sale of the property and the date of the exchange of contracts on that property The number of days property sits on the market before sale will give investors a measure of supply and demand in those markets and Bell believes it s useful for hotspotting type research trying to uncover good locations for investment Lawless rates how long properties take to sell as one of a number of key leading indicators for property alongside the level of vendor discounting the amount of stock on the market and the number of sales in trend terms These measures Lawless says are
44. rom the lowest price to the highest the middle price the 20th sale on that list is 470 000 Apart from the time lag Bell mentions another weakness of median price data is that changes in the type of property being sold during different time periods will skew the result For a particular time period like for example while we had the boosted First Home Owner Grant there were a lot of transactions in the lower price brackets and what that did was skew the median values Wakelin explains Conversely when conditions get very strong and these grants sunset there s a bias of transactions in the middle and upper range and so that skews the median value Rismark International managing director Christopher Joye says there are other biases that can affect median price data too For example if people build and transact bigger or smaller homes over time then the median price may rise or fall giving the impression that prices have climbed or fallen when in fact they really haven t Renovations also cause problems for median prices Joye notes because if a lot of homes are renovated in a given suburb that can artificially lift the median price suggesting there has been capital growth when in fact prices are higher because the houses being sold are better than they were previously Beyond the level of suburb level median prices a number of independent providers examine house WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY I
45. roperty listed for sale the listings aren t as comprehensive as some major property portals click on its icon and then choose search nearby to find nearby schools restaurants and in some locations public transport facilities You can also look up estimated travel times between your target property and your work or your children s schools The website Walkscore http bit ly 17HQgZ taps into the Google Maps database to provide a walkability score for any address In other words it looks at what shops schools universities parks and more are within walking distance of the property and reports back One of the limitations of this website at the time of writing at least was that it didn t account for proximity to public transport Still its a handy tool to have at your fingertips Another online tool for finding out more about the community around your targeted investment property is realestate com au s Local Voices section http bit ly 1pY10j where local residents can log WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 27 in and post information about their community including rankings of what it s like to live on a particular street Simply visit the site and plug in your area of interest Case study Supply and demand Investors can tie together a whole pile of property data to analyse supply and demand in the market writes
46. rs who are entering a market they don t know particularly well and to guard against the risks of two tier selling and being conned by a property spruiker Bell notes If you have a broad idea of what the actual price may be in this current market then that can save you a lot of pain he says Tim Lawless says automated valuations are becoming more and more widespread but their usefulness varies depending on the market an investor is looking at They can be useful as long as they re in an area that has a lot of comparable sales and you have the attribute data for the properties he says On the other hand they don t work very well in suburbs with a lot of unique housing It takes a person to figure out how much a view is worth or an extensive renovation Lawless notes Nonetheless today s automated valuations can take into account a wide range of factors including type of property number of bedrooms bathrooms parking land size and features comparable sales in the area current market trends distance to bodies of water train lines and views Bell notes that just as valuers are allowed a margin of error on their independent valuation reports automated valuations will also have a margin of error This is typically in the order of 10 per cent to 15 per cent although some investors have reported automated valuations that have missed the mark on their properties by much more Where to find automated valuations
47. so provides demographic data in its easy to use and free suburb profile search tool http bit ly duqkjx Rather than using Australia wide averages as its point of comparison Domain provides averages for the capital city or state an area is located in giving investors an extra piece of data to examine RP Data s free suburb profile search tool http bit ly idcVQrO and SQM Research s free demographic data search tool http bit ly oxxzsr provide similar types of data in a graph format which some investors may find easier to read SQM s tool provides projections for the data out to 2011 and 2016 WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 21 Comparable sales Tim Lawless says comparable sales are the real gold for investors looking to make investment decisions Comparable sales are essentially the sale prices of similar homes in the same locality as the target property Before making an investment decision you really need to be drilling down a little bit further than median prices and actually looking at comparable sales which are probably the real key to understanding what a particular property should be bought for Lawless says Independent valuers use comparable sales to determine the value of a property for lending purposes so it s important for investors to understand how to use them to determine whether they
48. t s reported quite widely and we keep a very close track of it It does give a very good indication of whether the market s hot or whether it s cold If look back at a chart of auction clearance rates versus how prices did move when that data eventually comes through the correlation is amazing Clearance rates provide a clearer picture of the state of the market in Sydney and Melbourne than elsewhere in the country Bell notes You have Melbourne where auctions are up to close to 20 per cent of the number of sales and Sydney above 10 per cent but closer to 10 per cent Canberra s good too We produce data for Adelaide and Brisbane as well but the volumes are so much lower so the correlation isn t as strong but they do still give that early indication of whether a market s mainly in Adelaide and Brisbane whether it s moving up whether it s moving down or staying flat Bell says auction clearance rates aren t quite a true forward indicator but they re about as current as property data gets The problem with all property data is most of it s lagging Auction clearance rates is about as current as you re going to get in terms of how the market s going In terms of things that correlate directly to price and the relationship is easy to see think it s those auctions clearance rates and auction volumes Monique Wakelin isn t quite as convinced about the importance of auct
49. t a particular point in time Property watcher Jeremy Sheppard outlines one such approach in the case study at the end of this eReport On a simpler level the property search engine realestate com au provides graphs for each suburb around Australia showing how many people are searching for property in that location compared to how much property is available for sale This can provide a simple snapshot of how supply and demand trends are shaping up Where to find supply and demand data From the realestate com au homepage select Suburb Data from the left hand navigation Then choose the state and suburb you re interested in You ll be presented with graphs showing movements in median price and supply and demand as well as a list of recent sales in the area Land value Mark Armstrong believes studying underlying land values is a great data point for property investors especially when analysing the investment potential of an individual property Armstrong s office uses a database to keep a constant track of what land is worth per square metre within its areas of interest We use that to determine the land to asset ratio Armstrong explains The starting point of WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 24 determining that is knowing the value of the land per square metre He adds Land to asset ratio is a really important i
50. t be revised much When you put those against price changes historically when you eventually know them they give an excellent indication of not only the direction but the level of price growth or price falls in that area The adjusted clearance rate figures take into account the number of withdrawn auctions creating a conservative figure Bell says Where to find auction clearance rates API publishes month by month auction clearance rates for Sydney Melbourne Brisbane Adelaide Perth Canberra and the Gold Coast every month in the Databank section of the magazine APM makes weekend auction results for Sydney Melbourne Brisbane and Adelaide freely available online http bit lyfowXEzb each week The suburb search tool on the same website provides annual auction clearance rate data for individual suburbs around the country RP Data also publishes weekly auction results with an archive available on the news page of its website http bit ly bZffUY WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 16 Vendor discounting Vendor discounting data provides a measure of the average reduction in price between the first time a property is advertised on the market and its final sale price Lawless rates vendor discounting as another of his leading indicators that provide insight into where a particular property market is headed API
51. to find comparable sales Lawless says comparable sales data is becoming increasingly easy to access for free Property portals have started publishing details of recent sales in property search results On realestate com au for instance if you search for property in a given suburb and click through to one of the featured properties you only need to scroll down to find a list of local sales These won t all be truly comparable to the property you might be looking at but they provide a starting point for further research APM has a similar free listing of recent sales available via its Home Price Guide website http bit ly owXEzb and sells more comprehensive listings of sales over the past two years RP Data http bit ly fowXJhE also offers recent sales reports for a fee as do other real estate information providers such as www propertyvalue com au and www homeguru com au Perhaps the most common way of accessing this sort of information and the cheapest is more old fashioned speaking to agents who ve sold property in the area By monitoring local sales possibly even keeping a database of comparable sales over time investors can get a good view of what s happening in the market Sales history Many investors are interested to find out the last sale price for a property they re considering buying Unless the sale was particularly recent the price is unlikely to be particularly relevant to the current value but it s certainl
52. ustralian Property Monitors APM economist Matthew Bell says exploring property data is the best way for property investors to offset the risks of investing It s vital for investors to understand the market they re buying into rather than taking a property spruiker or real estate agent s word at face value But Bell says investors shouldn t take things to the other extreme either and invest on the back of statistics alone It s important to know that top level data but think people can t go past looking at comparable sales talking to agents and especially going for a walk up the street and around the area where they re looking to buy Wakelin Property Advisory director Monique Wakelin agrees that buying on the back of statistics alone can lead investors up the wrong path I Know people who ve made horrible mistakes in the property market she says and all they do is sit behind a computer and look at median values and chart those and then they go out sight unseen almost to a property and buy it based on what they reckon the median value for that suburb is That s just a classic mistake Wakelin warns investors not to get too caught up in what any individual piece of data might mean WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA about a suburb You don t want to isolate one factor at the exclusion of everythi
53. vides insight into the long term growth prospects of a suburb whereas statistics only show the current prospects for growth which may change in six month Statistics are objective but suffer from anomalies The trick to using statistics is to gather as many as possible from as many varying sources as possible to hopefully filter out such anomalies There are supply and demand statistics of interest readily available These make it quick and easy to see if a suburb of interest warrants further in depth research using the guesstimate fundamental method described earlier You can determine a DSR for the suburb of your choice right now in 10 minutes if you have internet access Use the following procedure to gather demand and supply statistics about your chosen suburb revisiting some of the topics already discussed in this eReport Days on market This is the average number of days a property will be for sale before eventually selling If this figure is low it means either there s high demand from buyers or low supply from sellers or both The buyers act quickly on an opportunity before competing buyers snap it up This figure for a suburb can easily be found at the back of every issue of API Be sure to check figures for both houses and units since they may differ significantly Each suburb has a different time on market profile So what might be slow for one suburb could be fast for another Expensive properties usually take longer to sell t
54. when were looking at individual asset selection he notes I think if you re relying on median data for asset selection you re really not getting deep enough into the analysis that needs to be done It s important to understand that all the properties in a suburb aren t the same and as a result median prices can t reflect everything that s happening in the market Wakelin adds That s why you never get two one bedroom units selling for the exact same price because they re not the same Changes in median prices are by their very nature historical data and for this reason property author and chair of the Property Investment Professionals of Australia Margaret Lomas says the data has a limited application It can only tell me what has happened rather than what will happen she says Also it doesn t usually reveal why something happened For example strong growth data may be due to a number of things such as a short term infrastructure project and this impetus may not be sustainable into the future Investors need to pair median price movements in a suburb with other data and on the ground research before making an investment decision Lawless says Experienced investors find that median price statistics are very useful but only as guides You can t take a figure for median price growth in a suburb and assume that your property s value will have climbed by the exact same proportion for instanc
55. wth The next step up the data tree from a raw median price is to look at how the median price in a given location changes over time There are two sets of figures in API s Databank that fit this description First up is median 12 month growth represented as a percentage Let s return to the example cited earlier of Alawa in the NT Its median 12 month growth comes in at 11 6 per cent which means its median price in the 12 month period ending on December 31 2009 is 11 6 per cent higher than for the corresponding period ending on December 31 2008 The next median price growth figure in API Databank is annual growth over 10 years again shown as a percentage For Alawa in the April 2010 edition this comes in at 11 9 per cent which means that over the past 10 years Alawa s median house price has grown at an average rate of 11 9 per cent per year As you d expect all the same biases and limitations that affect the collection of straight median house prices also affect data for changes in those median prices over time Here s how Tim Lawless explains it Using medians to determine capital growth can be a little bit misleading particularly if you re looking at areas that have a differentiated stock offering What mean by that is if you have a suburb that has a lot of waterfront housing or elevated housing that would have a significant premium attached to it and on the other side you have houses that don t have those pre
56. y interesting from a voyeuristic perspective to know how much the vendor originally paid for the property Be aware though that the last sale price won t take into account any money the owner spent renovating or improving the property Where to find the sales history APM http bit ly owXEzb offers investors the ability to buy a report showing all sale prices in a given street over the past 20 years WWW APIMAGAZINE COM AU FOR HOMEBUYERS AND PROPERTY INVESTORS AUSTRALIAN PROPERTY INVESTOR eREPORT USER S GUIDE TO PROPERTY DATA 23 RP Data http bit ly owXJhE offers a detailed report on an individual property including the current owners and sales history It also offers a report outlining property sales in a given street over the past 10 years Both reports are available for a fee RP Data subscribers can also search for this same information Property research website On The House http bit ly 9GvWwM offers a free mapping service that includes the last known sale price and date for individual properties Alternatively a friendly local real estate agent though usually not the vendor s agent may look this figure up for you on RP Data Supply and demand Supply and demand is the golden rule for determining price in the property market but trying to determine how the two factors match up is a difficult equation It typically involves piecing together multiple points of data and trying to decide how they re aligned a
57. y rates as a trend tool watching to see whether vacancies are moving higher or lower in a given location over time A downward trend indicates increasing demand she notes You must independently confirm what s driving this downward trend to ensure that it s a sustainable factor Rental vacancy rates measure the proportion of properties available for rent at a given point in time compared to the total number of established rental properties Like data for the amount of stock on the market seasonal factors have an effect on vacancy rates as certain times of the year tend to see more rental listings become available So again it s important to compare like for like data wherever possible API publishes vacancy rates data for postcodes around the country towards the back of each month s issue in the Databank section of the magazine APPs data is sourced from SQM Research it collates the data by watching online advertisements for rental property over the timeframe of each calendar month Properties are classified as vacant if they ve been advertised for two weeks or more and are still currently advertised when the data is being collated To calculate the total number of rental dwellings in a postcode SQM takes the total established dwellings figure from the 2006 Census and then estimates the total dwellings for more recent years It then multiplies this by the percentage of renters for each postcode as also provided in

User's Guide To Property Data

Contents

Download Pdf Manuals

Related Search

Related Contents