Property Index



From: E T

Hi Forumites
There is an interesting article the Feb
My Wealth magazine about a Sydney agent
(McGrath R/E) who have joined forces with
Aust Prop MonitorsAPM) who are the publisher
of the home price guide .This collaboration
will produce an Index for residential prop
which not only gives a snapshot of historical
data but the agent is claiming "a window into the future,predicting the fastest growing sectors and property types"
They claim their model takes into account
%rate,Aust Stockmkt,US/AUD$,CPI ,GST,CGT
inflation rate,FHOG,Date of prop sale,
location and house or unit
It is only in Sydney at the moment and they
expect that the index will be at 155.4 index
points in March(up 4.8% from Sept 2001)

Sydneysiders will be able to wake up every
morning now and check the index - even
Eric should have something to say about this!

Statistics seem to be overtaking everything

Any thoughts?

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Reply: 1
From: Sim' Hampel

On 2/25/02 9:40:00 PM, E T wrote:
>Statistics seem to be
>overtaking everything

I seem to recall an oft-quoted and rather cynical view on the value of statistics. But let's not get into that now...

The concept of an index is a good one, indeed if used correctly it may allow us to have a measuring stick against which to compare the performance of our properties.

However, it does pay to be aware of exactly how the index is constructed and keep things in perspective. Not all indexes are meaningful !

For example, there are literally dozens of indexes used to track various parts of the Australian stock market... from the well known "All Ordinaries" to the more recent "ASX 200", "ASX 100", "ASX 50", etc etc. There are sector indexes, small cap indexes, large cap indexes, indutrial indexes, mining indexes, indexes of indexes... I think you see the picture ?

My point is that if you are only buying blue-chip shares selected from the top 50 Australian companies (by market capitalisation), then the small cap indexes are of no use to you, and even the "All Ordinaries" and "ASX 100" and so on are of little value.

Likewise, if you concentrate on blue-chip property within 5km of the Sydney CBD, a city wide index will not be particularly meaningfull except in overally terms. Similarly, if you're wrapping or buying cashflow on the outskirts, a general index is also rather useless.

So, by all means look at the index, but make an effort to understand WHAT the index is measuring, how it is constructed and put it into perspective when comparing your property performance.

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Reply: 2
From: Nigel W

I agree with Sim. Indexes have their uses, but if a buyer or valuer thinks your property is worth twice what you paid for it 5 minutes ago, who gives a rat's .... that the index says your house has only grown by 4.123456% this year!!!

Indexes are about one number representing a whole market...but property is all specifics - YOUR specific properties!
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Reply: 2.1
From: Ross Sondergeld


Subject: Property Index

In the US some banks, etc use a central "computer system" that values
properties based on sales in the local area and an economic formula.

So instead of getting a valuer to value a property. The banks orders the
computer valuation via the computer and it costs $20 (i think).

Conservative estimate of value, but it does show how an index / formula is
being used to estimate movements in the market.

Ross Sondergeld ~ Buyer Agent

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...with a Buyer Agent on your side!!! "

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Reply: 2.1.1
From: Stirling Reid

The valuer general in South Aust uses a similar system. eg all double fronted bluestone houses in Croydon are grouped together and the value of your house is determined by the past sales of all houses in the same group. They probably apply some multiple regression analysis on variables such as house size and block size.
(Capital Values are used to set council rates and water rates and are updated every year)

Stirling Reid
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Reply: 2.1.2
From: Jas

>From: "ross sondergeld" <>
>Subject: Property Index
>In the US some banks, etc use a central "computer system" that values
>properties based on sales in the local area and an economic formula.

This is happening in New Zealand too. how soon will it be before it hits


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