With property prices shaping up as a key election talking point, the Coalition and Labor continue to trade barbs over the Opposition’s planned changes to negative gearing and the capital gains tax discount.
While the Coalition claims that Labor’s proposed changes could undermine confidence in the property market and lead to further falls in housing prices, the reality is by some metrics, property prices have already fallen by over $400,000 in some suburbs.
As property prices continue their downward trajectory across most of our nation’s capitals, the statistics coming out of the different housing price data providers has become increasingly contradictory for a number of different suburbs.
While at least some of the discrepancies can be explained by the fact that data sources use different methodologies, the difference in reported prices has continued to expand as property prices continue their downward trajectory.
The delay of up to three months in recording the actual price a home sells for is also no doubt, playing a role, between the prices prospective homebuyers are seeing on the ground and those that are reported by the likes of Domain or Realestate.com.au.
In order to drill down and examine exactly how varied the different metrics can be, a single suburb and postcode was chosen to illustrate the growing inconsistencies between the various data sources.
The suburb of Frenchs Forest (Postcode 2086) on the Western edge of Sydney’s Northern Beaches was ultimately selected to be used as an example.
According to SQM Research’s Weekly Asking Price property prices index, houses in Frenchs Forest peaked at approximately $1.7 million in early 2018.
In their latest data released for the 2086 postcode on the 2nd of April, that figure had declined to $1.296 million, a drop of a little over $400,000 in the last 15 months.
The figures from Real Estate.com.au state that prices for houses in the Frenchs Forest area peaked at $1.652 million in September of 2017.
In their latest data released for the Frenchs Forest area on the 28th of March, the price of houses in the area had declined to $1.425 million, a drop of $227,000 in the last 19 months.
What conclusions can be drawn?
Generally, the seller of a home rarely gets the asking price stated in the marketing material for the property, with homes in Sydney even during the height of the boom still selling for between a 2% and 3% discount off what they were originally advertised for.
As the property market continues to weaken, the average discount offered by a property’s vendor in Sydney has continued to rise from less than 3% during 2015, to 7.5% today.
If the asking price for the average property currently for sale in the 2086 postcode is $1.292 million and roughly a 7.5% vendor discount is on offer, the median sale price for homes in the area at the moment would be approximately $1.195 million, at least according to some basic bar napkin maths.
This figure is a far cry from the $1.442 million price stated by Real Estate.com.au.
This discrepancy further illustrates the issues with some data sources, even without taking into account any vendor discount.
How is it possible that the prices of homes sold in this specific area are approximately $129,000 more than what the actual vendors are asking for them?
While there are a number of differences between the various metrics in terms of how their methodology goes about measuring housing prices, the discrepancies that were relatively small during the boom have expanded substantially, to the point where they can no longer be ignored by a potential buyer.
Into the Future
As some agents and other vendors of property continue to delay providing the details of sales to the suppliers of property price data, the discrepancies between the different data sources are likely to remain.
With experts predicting property price falls to continue for at least the near future, those of us who lack sources within the real estate industry will have to work all the harder to ensure that we get the best possible information; to make what is for most of us the biggest financial decision of our lives.
Regardless of whether the Coalition or Labor ultimately prevail in the next Election, housing prices are likely to remain a hot topic of conversation around BBQ’s and dining tables across the country.
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