QWhy does the real estate industry persist in only providing ‘median’ house price information?
The median price information is essentially useless unless the ongoing trend towards apartment living and section subdivision is taken into account.
For instance, near where we live in Auckland, a developer recently brought a large section for $1 million, knocked down the old existing villa and built 4 townhouses. Each was sold for roughly $600,000. Pretty standard stuff.
However, the effect on the median price presented in the statistics is a reduction in the median price, even though the value of the site has more than doubled!
The recent surge in cheap apartments constructed in Auckland is skewing the statistics even more erroneously.
I feel that a much more useful measure of house price inflation would be the percentage change in the price of the same (representative) house from one year to the next.
If this new measure for house prices was used, you would find that Auckland is still experiencing massive house price inflation, far from a downturn!
I wonder if any of your readers has access to figures showing the true annual increase in the price of a house in New Zealand?
AYour reasoning sounds so reasonable. But I’ve got two major problems with it:
- Despite the growth in apartments, the average size of new dwellings including apartments has been increasing.
- Gathering data on a single house could be terribly misleading.
First, dwelling size. The average has grown from 146 square metres in the 1970s to more than 200 square metres since 2000, according to mortgage bankers Cairns Lockie.
These days, we expect houses to have a family room as well as a living room, two or even three bathrooms and/or toilets, a walk-in double garage and so on.
What’s more, the firm says, the average cost of building a house has risen from $703 per square metre in 1990 to $935 in 2003. That’s about half a percentage point more than inflation each year.
When both the price per square metre and the number of square metres rises, the price of the average new house must rise strongly.
Admittedly, section size has probably decreased, partly because of subdivision. But I doubt if that would outweigh bigger and more expensive new houses.
If we adjust for that, we could well find the opposite to what you say — that the value of the average existing (non-new) Auckland house has risen less than the median figures suggest.
After all, new houses make up quite a large proportion of total house sales, but a much smaller proportion of all houses.
As for monitoring the price of a single house, which one would you choose? The choice of suburb and dwelling type would make a huge difference.
And how would you adjust for maintenance? One year, the owners might spend nothing on maintenance, the next year many thousands. You would have to allow for a certain amount, to reflect average maintenance spending on all houses. But how much is that? That’s another data gathering problem.
Perhaps hardest of all would be establishing the value each year. Valuations, as we all know, are sometimes way out. And they would tend to be based on the very data, on median prices, that you don’t like.
It wouldn’t be ethical to put the house on the market each year — at a price or by auction or tender — if there was no real intention to sell it. Anyway, after a while word would get around that sales of Number 62 Whatsit Street are fake.
Even if you did set up a fake sale, the price would vary considerably, depending on who happened to be in the market at the time, how much they needed a house in a hurry and how much they fell in love with Number 62.
There’s lots of luck, good or bad, in any house sale.
Having said all that, I agree with you that median figures on house prices are probably flawed. But at least aggregate figures get around many of the problems above. They average out different suburbs, types of dwellings, levels of maintenance, enthusiasm of buyers and so on.
Median prices are far from perfect, but they’re the best we’ve got.
QMost house sellers seem to opt for a sole agency, thereby locking themselves into high fees and advertising costs, as well as limiting the pool of potential buyers.
In our experience multi-listing can provide an acceptable alternative. We sold a family property south of the Bombay Hills two years ago, when sale prices were pretty much set by the then current government valuation (about $520,000 in our case).
We listed with some seven local agencies, and also advertised on our own account through three websites and an Asian weekly newspaper.
Some of the agencies worked quite hard on our behalf, contributing advertising money and holding open days. We had two or three offers through agencies around or slightly above the government valuation.
In the end our own advertising sold the property for $640,000 (23 per cent above government valuation with no commission to pay).
The point is, we felt that all agencies had a fair opportunity to sell the property, that we tapped a wide spectrum of potential buyers, and came out of the deal satisfied with the overall marketing effort.
AI’ve just received, in the mail, a copy of a booklet called “18 Costly Mistakes Made By Home Sellers,” and one of them is multi-listing.
“You may think this will increase your chance of finding a buyer,” it says. “But it decreases your chance of getting the highest price.”
“The agents will be in a hurry to sell your home before another agent sells it. The sale will be most important. The price will be forgotten.”
Who’s saying this? An Aussie outfit called “The Jenman Group — promoting ethics in real estate”. A Napier man who says his real estate firm will soon be the first Jenman-approved agency in New Zealand sent me the booklet. So it’s easy to dismiss the comments as self-interest.
They do, however, make some sense — as do other items in the “18 Mistakes” booklet, which includes warnings about auctions, advertising, open homes and so on.
I also like the material the man sent me on selling and buying without agents, and the “Real Estate Consumer Protection Guarantee”, which sellers can ask their agent to sign.
All of this can be downloaded, or requested, from www.jenman.com. I know nothing about it, but just browsing there gives food for thought. And a reader recently recommended Neil Jenman’s book, “Don’t Sign Anything!”. She commented, “It’s a real eye opener.”
Back to your point on multi-listing. It seems that it worked for you because you also marketed the property yourselves. Perhaps that’s the secret. Well done!
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Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.