December 21, 2023

Microburbs: Why Smart Median Sale Prices Are Important for Small Suburbs

What is a smart median sale price, and how can it help you come out on top in small suburb markets?

Guides

When analysing the property market and house prices within a suburb a natural thing to think to look at is the Median sale price of houses in the suburb. Whilst medians can certainly be better than just taking an average as they can better account for outliers, in the case of looking at what houses in an area are selling for it can be rather deceptive. Consider a suburb with a wide range of different quality properties, a few newer more expensive homes and older traditional homes built decades ago. The older homes are likely owned by people who have lived in the area for years and hence do not change hands nearly as often. When these newer properties come on the market and begin being sold at a higher rate than the older homes, even if there are far fewer of these newer homes, the median price will suddenly start trending upward. This can be deceptive as in truth the median does not reflect the actual price of most properties in that market. Especially, in lower-volume markets these handful of properties can have a wide sway over a median price. 

Top: Core logic Median Price for Warrandyte

Bottom: Microburbs Smart Median Price for Warrandyte

Hence, Microburbs has worked out sophisticated methods to create a “Smart Median Sale Price”, one that properly reflects the value of homes in an area. We look at the past performance of the market and how the value of properties currently being sold compares to previous sales. If there is a large pool of high-value or low-value properties we determine the equivalent value of the average property in the market at that point in time. Compared to our competitors this allows us to take a closer look at how the changes in the price of lower and high-end properties affect the price of the average property, if we can see an increase in the value of lower-end properties we can reflect this in our overall assessment of the market value.

When it comes to smaller rural suburbs and other low-volume regions there’s still the issue of having only so few sales to generate this Smart Median price from. Hence we take a fine-grained look at small micro-areas that have similar properties to the ones in the suburb. These micro-areas are not suburbs themselves but rather small pockets of properties with similar growth and prices over time. This means that compared to competitors who may infer prices for one low-volume suburb by looking at prices in a whole other nearby suburb, ours can be more precise and accurate by considering only what is actually relevant to the suburb we are looking at. Additionally, by using these micro-areas our prices over time require far less smoothing and inference as to what the typical price of a property is, making the Smart Median Prices more reactive to the state of a market.

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