Property market analysis can be confusing with the major data houses and property commentators using a variety of price assessment methodologies in their published analysis. For example, according to Core Logic, Perth’s median dwelling value is $813,810 as at 31st May. Ray White group’s Chief Economist reckons Perth’s ‘geometric mean house price’ hit $922,250 in May, Pricefinder says our median house price is $848,980 and REIWA’s median house price is reported as $780,000.
There’s a gap of $142,250 between the highest and lowest insights and whilst the methodologies differ, that’s still quite the variation. When determining their Home Value Index, Core Logic uses something called hedonic regression modelling which considers a property’s attributes including number of bedrooms and bathrooms, land and floor areas, location and proximity to amenities. The model uses recent sales data, incorporating the attributes of all transacting properties within a specified period. It then imputes values for all observable properties in each area, enabling the index to reflect movements in the broader market, even when transaction volumes are low.
Core Logic’s approach to analysing market price movements digs deeper than mere median price analysis where a set sample of sales in a given area can reveal significant price variations, especially where the sample is small or there is a high concentration of property sales at a particular price point. An example of this is in areas where a large apartment development settles numerous properties together at a lower median price point which may drag down the overall median. Similarly, using median price as a market guide can be tricky if there is only a sample of say 20 property sales. Median price is useful but is best used across a quarterly and annual basis to assess trends rather than specifics.
Ray White’s geometric mean method multiplies all values in a dataset and then takes the nth root (where ‘n’ is the number of values). This approach is particularly effective in mitigating the influence of extreme values, such as exceptionally high or low property prices, which can skew averages. Using the geometric mean provides a more stable and reliable measure of average house prices, especially in markets with significant price variability.
Each mainstream commentator and data analyst offers useful insights into our market. The figures might vary but the themes are almost always aligned and that – right now – is that our property prices are continuing to rise.
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