Puzzle Finance Blog

Deciphering real estate jargon

DOES the term "home value index'' mean anything to you?

Buyers, sellers and investors have a wealth of information at their disposal when they start researching the property market.

But this data is not always easy to understand, leaving many consumers clueless about what the latest figures mean.

RP Data spokeswoman Michelle Koper said it was important to make the most of the property data available to you.

"Our data provides customers with insights that realise more market opportunities,'' she said.

"The purpose is to make calculated decisions if it's the right time to make a purchase.

"You've got to do your homework and then the research that we provide allows people to expand on their knowledge.''

Ms Koper said learning to use data was ideal for anyone entering the property market.

"If you were a first-home buyer and you knew nothing about that market you could certainly get a lot of information from RP Data's systems,'' she said. "We use public information to bring insight and transparency to the market.''

Following is a list of some key terms and what they mean for the average consumer:

Average days on market

This refers to the average time a property has been for sale. RP Data measure this from the date at which the property is initially listed for sale compared to the contract date of sale.

"Buyers can use this data with agents to negotiate a better deal for homes on sale for a long period of time,'' Ms Koper said.

"Sellers can use this data to give an estimate of how quickly their home may sell.''

Average vendor discount

This compares what homes sell for against the price they are first advertised. This information is then collected and expressed as a percentage where a small negative figure means your home has been discounted less. Ms Koper said this figure helps sellers decide how far to go when negotiating a price.

"The discounting figure highlights to buyers the likely scope to negotiate on price and for sellers it indicates how prepared they may have to be to drop the sale price in order to achieve a sale,'' she said.

Indicative gross rental yield

The indicative gross rental yield is a figure designed to show how much rent a property would return if it went on the market. RP Data calculates this by analysing median weekly rents over the course of a year and then dividing that number by the purchase.

Ms Koper said the yield figure provided a good indication of gross returns but warned net returns were likely to be lower.

Median sale price

A median price is the middle priced in a list of sales. This figure gives an idea what a typical house is selling for over the time period the data was collected.

"Median prices can be heavily biased by a range of factors including the sample size (how many transactions are included) and the types of properties that are transacting or not transacting,'' she said.

"There are many reasons why there are different median prices.''

The main reason for different medians could include the timeframe the data was collected and the way the data was filtered and classified.

Home value index

This is considered to be a more accurate and sophisticated way of measuring value as it gives a better indication of growth and value than the median sale price.

Ms Koper said there was a reason this index was considered more accurate because it measured all dwellings.

"Historically house price indices have only included dwellings that have been sold during the measurement period, by definition ignoring the vast majority of the housing stock,'' she said, adding the home value index was beneficial for buyers because it removed bias present in the market.

"Understanding factors such as the number of bedrooms and bathrooms, the land area and the geographic context of the property allows for a much more accurate analysis of true value movements.''

Read more: http://www.news.com.au/realestate/investing/deciphering-real-estate-jargon/story-fndbarft-1226599649852#ixzz2NuyA1aKq

Posted by Kieran Rooney - Gold Coast Bulletin on 18th March, 2013 | Comments | Trackbacks

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