Stats you Need to Know Before You Buy
Big purchase decisions like buying a home can be quite terrifying. But there is a way you can put your mind at ease. How? With evidence.
Using stats and data to support or reject your purchase is the ultimate way to build your pros and cons list. You’re dealing with facts, not emotions. And while properties tend to be a very emotional purchase, you might find yourself in hot water if you only listen to your heart and totally ignore your head.
I’m a big fan of stats and data. It’s one of the reasons I’ve had great success in the real estate market. I interpret data and forecast using stats and precedence. It’s a little bit of science and a whole lot of level-headedness that’ll help you succeed in the property market.
The problem is most people really don’t have a great understanding of what stats they should know about when purchasing a property. It’s kind of like how kids don’t get a money education in school. It’s so essential, yet it has just dropped off the radar.
It’s for this reason, I think the whole listing format needs to be changed. Not only should you see the number of bedrooms, bathrooms and location features, you should also see important stats. A home with leafy outlook near schools is nice, but there’s more you need to know about the area and home and even the market.
To start off simple and not have your brain hurting we’ll look at the basics. Experts say that there are five property stats to pay attention to when trying to get a read on your local property market. Let’s take a look.
Before you’re in purchase mode, you should be watching and waiting. One of the key things you should be keeping an eye on are median prices and particularly how they are changing – it’s currently the best way to see how the market is performing. You can look at this data daily with CoreLogic RP Data providing an index where you can see how five capital cities are performing.
When you’re on the next stage of your journey and you’ve narrowed down the suburb or suburbs you want to buy in, start investigating the median price changes on Real Estate.com.au Neighbourhoods. You’ll be able to see the median price to buy/rent and a market trend graph.
If you’re looking at an investment property, this is critical to your purchase. And they’re good to look at alongside median prices. If the rental increase is strong and so is the increase on median prices, you’re onto a winner. It means that the market is strong – people want to live in the place, so you can be confident you’ll get a return on your investment. If you’d like to get a little more insight into rental yields, take a look at www.suburbview.com
Clearance rates and number of auctions
A clearance rate is the number of properties sold via auction versus the number of properties that went to auction. Essentially, it shows the success rate of auctions. If the clearance rate is high then it means the market favours sellers as there are a lot of buyers competing for properties (more properties are selling). On the other hand, if the clearance rate is low then the market favours buyers as the market is slow and sellers may be competing for buyers.
If you want to see how the market is performing, you must look at clearance rates. To give you a guide on what’s good, bad and acceptable have a look below.
Generally, if clearance rates are:
Above 80% – very strong conditions
70-80% – strong conditions
60-70% – moderate conditions
Below 60% – slow market
But it isn’t enough to look at clearance rates – the number of auctions is also an important indicator. If the clearance rate is high but the number of auctions has dropped significantly, it would suggest the market is slowing down. Why is this? In slow market conditions, it is more unusual for an agent to recommend going to auction. An example of this would be the Sydney market during the height of COVID-19.
You can also find the weekly clearance rates at www.realestate.com.au/auction-results/
Low interest rates
The humble interest rate has been a key driver for investment. If the interest rates are low, the cheaper funding allows people to buy more and that leads to price growth. Right now, we’re seeing record-low interest rates as the government tries to stimulate the market.
The Reserve Bank of Australia (RBA) sets the cash rate and this has a major impact on the interest rates that the banks set. You can find the current cash rate on the RBA website and to find the best mortgage rates check out comparison sites like Rate City and Finder.
Finally, it’s important to keep track of upcoming supply – it’ll tell you whether there’s too much or too little housing being developed. An oversupply of housing can lead to decreased property prices – and you don’t want that. The ABS tracks a range of housing supply indicators including housing approvals, completions and commencements.
You can look at approval data on the ABS website to get a better idea of what’s in the pipeline. Although not all developments approved will be completed, if there’s a market with high development approvals and a drop-in house prices and rental rates, you may want to sit tight.
Another key thing to consider…
There’s one final thing you may want to investigate – the lifestyles and the people of the area. This can indicate the shape of the future. We’ve all seen major gentrification of lower socio-economic suburbs inhabited by artists. This is an opportunity to make real money off your property investment. You can find some information on the demographics of the area online, but sometimes you may just need to walk the suburb and observe the activity there. Or you can ask an expert, such as yours truly.
Big investments are major life decisions. Back yourself by knowing your stuff. I’ve seen too many people fail from buying things on a whim, just because they want to get into the property market. Stats don’t guarantee success, but they’ll sure improve your chances of choosing a rock-solid investment. And isn’t that what we all want really?
Stats and data, I love them. They sure help me sleep better at night. ❤️