December 2009 Quarter Property Update REIV

[Muffinman]

Watch "December 2009 Quarter Property Update REIV CEO, Enzo Raimondo" on Realty Tube Australia - Real Estate Videos

A new record Melbourne median house price: $540,500

22-Jan-2010

The REIV December quarter Property Update has revealed a new record high median house price of $540,500, an increase of 15 per cent from $470,000 in the September quarter.

REIV CEO Enzo Raimondo said that it was the largest increase in the median house price since the REIV started keeping quarterly records.

In the December quarter of 2000 the median house price increased by 14.9 per cent and by 12.4 per cent in December quarter of 2007, compared to 15 per cent in the 2009 December quarter.

The combination of a better than expected economic conditions and strong population growth has resulted in an unprecedented level of pressure on housing costs in Melbourne.

The citys population is increasing by around 1,700 people per week and unfortunately housing construction has not responded as quickly as would be necessary to ease the pressure in the market.

The level of confidence in the market is apparent from the number of homes being bought and sold; the REIV has recorded an increase of 22 per cent since the 2008 December quarter.

This is highlighted by the strong growth in the middle of the market. The largest increases in median prices have occurred for homes priced between $500,000 and $900,000.

Burwood recorded the largest increase 23.1 per cent as the median increased from $658,000 to $810,000. It was followed by Ringwood, with a 16.2 per cent increase; Mount Evelyn, whose median increased by 16.1 per cent, and Brunswick, which now has a median of $724,250 after a 15.2 per cent increase.

Prices paid for units and apartments have also increased substantially, with a 7.6 per cent increase in the median from $410,000 in the September quarter to $441,000 in this quarter.

The suburbs with the largest increases in median price for units and apartments were East Melbourne, followed by Port Melbourne, Armadale, Caulfield North and Northcote.

House prices increased in key centres in regional Victoria as well. The median house price in the City of Ballarat increased by 7.3 per cent to $265,000; in Greater Bendigo by 4.3 per cent to $261,000; and in Greater Geelong by 4.4 per cent to $342,000, Mr Raimondo concluded.

www.reiv.com.au

 

[JamesGG]

You know the saying... lies, damned lies, and statistics. Medians don't account for much, particularly as they are reliant on a similar 'type' of property being purchased from one quarter to another.

That said; here's the graph for median price values in Melbourne over the last five years (and apologies for the oversized images).

And, the graph for Ringwood.

Paints an interesting story in respect to the old ripple theory, perhaps?

 

[Muffinman]

Paints an interesting story in respect to the old ripple theory, perhaps?

Yes it does

 

[Player]

Croydon perchance?

................Paints an interesting story in respect to the old ripple theory, perhaps?

Would the "pebble in the pond theory" you're alluding to perchance be spilling and rippling over into Croydon?

 

[JamesGG]

Would the "pebble in the pond theory" you're alluding to perchance be spilling and rippling over into Croydon?

It wasn't what I was getting at, actually, but now that you mention it...

That last spike in price is missing there, and there's about $100k difference for about 3km distance. Again, lies et al... but damn.

 

[Jaggannath]

Be more interesting to see average valuation price than median... recognising it lags the actual market, but I reckon it'd be more stable and reflective.

 

[Andrew_A]

The best measure I'm aware of is to track individual resales. Median can be very misleading.

 

[WinstonWolfe]

yeah medians suck, esp if they aren't seasonally adjusted.

better to listen to RP Data-Rismark Hedonic Indices.

they saw Melbourne up 14.9% over the whole of 2009. and the median house over the dec09 quarter was 499,000.

big diff to the REIV.

 

[Token Funder]

yeah medians suck, esp if they aren't seasonally adjusted.

better to listen to RP Data-Rismark Hedonic Indices.

they saw Melbourne up 14.9% over the whole of 2009. and the median house over the dec09 quarter was 499,000.

big diff to the REIV.

With you on that on WW. They're the bane of my existence. The fact is that due (I suspect) to the influence on the median numbers thrown around, the vast majority of borrowers significantly over-estimate the value of their property. As a result and particualrly over the last couple of years, you end up reworking/going back to the borrower on the vast majority of refi deals to explain that it aint worth what they think it is.

It adds time, cost and clogs up the works.

It goes without saying that the errors are rarely an underestimate.

I've spoken to the Rismark/RP Data from time-to-tim and though I appreciate and understand what they are endeavouring to do, when you think about what would be required to make the data "mean" what, in practice, people want it to mean, it's damn near impossible.

Unlike other assets, individual properties aren't sold particularly regularly and the only part of the asset that actually appreciates (in other than fairly infrequent cases) is the land content or equivalent.

Ideally, you would want every house sold every quarter and then have sufficient data to net back the cost of any improvements etc.

But, of course, that aint the way it works.

And therein lies my issue with hedonic indices.

It is all well and good to attempt to match properties of notionally comparable size etc. and endeavour to track comparable samples but ultimately:

*you're simply not tracking the same asset over time
*as anyone knows who has looked for property, the description 3bed/2bath covers a wide range of sins so the ability to "match" is at least questionable, in my view.
*you can't net back for material improvements that don't add to the compositional nature of the property. Whole streets in my neck of the woods have been renovated over the last 5 years, but some people still see the rise in median prices as the result of magic as distinct from a reflection of the many months during which you couldn't get a park due to the trucks and utes lining the street.

If I had my way, prior to taking an app for a refi deal, a broker would have to hand over an A4 piece of paper to each borrower advising that:

(a) they don't own the median house; and
(b) RE agents are to valuers as homeopaths are to doctors.

 

[WinstonWolfe]

If I had my way, prior to taking an app for a refi deal, a broker would have to hand over an A4 piece of paper to each borrower advising that:

(a) they don't own the median house; and
(b) RE agents are to valuers as homeopaths are to doctors.

Agree with your thoughts TF.
RPData Rismark is the best of an imperfect lot afaik.

and agree repeat sales of same property less property depreciation or allowance for improvements is the most objective measure. but hard to get a big enough data set.

makes a mockery of the objectivity of lenders and their valuers in a hot market.