The difference between median value and median price
Understanding the difference between the median sales price and the median value can provide you with useful insights into exactly what is going on in your local property market.
The traditional metric is the median sales price. This is the median – or middle – price of all the properties that have sold in the suburb over a period. Typically, a median sales price is measured over at least 12 months, with at least 10 sales to determine the median price (the more sales the better).
In any given suburb across Australia, an average of only 7% of properties are usually for sale at any given time. The median sales price is therefore, by its definition, the middle price of what is selling.
Furthermore, the percentage change in the median sales price measures the difference between what is selling now and what was selling during
the previous period, which can make median sales price changes appear more volatile. For instance, in a suburb where housing stock is mainly comprised of three-bedroom homes, a new development of two-bedroom homes being sold may skew the median price to be lower.
Alternatively, a cluster of homes renovated to four-bedroom properties boasting luxury fittings and features may skew the median sales price to be higher.
The second metric is the median value, which is a much more stable metric because of the amount of data used to determine the figure. It is calculated based on the value of every property across a suburb or geography, not just those that are sold. This means thousands of properties, and close to 100% of the housing stock is used to determine the figure.
At CoreLogic, our valuation systems calculate the value of every property across Australia every day. Because our systems power the majority of the banking and valuation industries, which require extraordinary accuracy of data, the median value is the middle value of every individual property in the suburb at a given time.
While the median value may not show as dramatic growth or change as the median sales price, it is largely regarded as a more definitive figure for a bank to use in valuing a property.
If the median value is higher or lower than the median sales price, this could be because your property is different to the types of properties currently selling (which you can check by looking at recent sales online and identifying property features), or it could be due to buyer demand.
If both the median value and the median sales price are significantly lower than what you’d like to get for your home, maybe rethink selling, as it’s an indication that your price expectations are out of alignment with the market.
Remember, the only truth is on auction or sales day as your home is only ever worth what someone is prepared to pay for it.
This article is from: nmsdata