What is the median house price?
First Published On https://leaddeveloper.com/what-is-the-median-house-price/
Median price in property development
The median house price is a popular real estate measure. This number indicates the average home value in a market. Learn how you can calculate the median house price and why it matters to buyers and sellers in real estate.
What is the Median House Price?
First, let’s define the meaning of median house price.
The median is simply the midpoint of a set of numbers. In the context of real estate, this set of numbers is usually the prices of homes sold in a particular market or area over a certain period of time, such as a month or a year.
The median house price or median property price is calculated by arranging all the sale prices in order from lowest to highest and then identifying the middle price point, where half of the homes sold for a higher price and half sold for a lower price.
NOTE -
While considering the median price, remember that the timeframe should be viable to work upon while deriving any calculations through it.
Learn More
Negative and positive median property prices
Negative or positive median house prices usually refer to variations over time. Negative median house price changes occur when the median house price decreases from one year to the next. However, a positive median house price change occurs when the median house price rises from one period to another.
For example, in one market, the median property price was $300,000 last year and $250,000 this year, representing a negative median house price change of 50,000.
If the median house price was $250,000 last year and $300,000 this year, this would show a positive median house price change of $50,000.
You can understand this concept better by watching the above video, where I explained some real examples with data on Melbourne’s median house price and median house price by suburbs.
Advice -
As a property developer, you can target suburbs with a lower than average median price, i.e., consider cheap suburbs next to expensive suburbs.
What is the median house price in Australia?
According to the Australian Bureau of Statistics (ABS), the national median house price in Australia in the December quarter of 2022 was AUD 920,100.
It’s worth noting that median house prices can vary significantly depending on the location and change over time. Therefore, the current median house price in Australia may differ from the figure provided above.
You are missing out if you haven’t yet subscribed to our YouTube Channel
How is the median price calculated?
The median house price is calculated by sorting property prices in a market from lowest to highest. The middle point is then determined, which is the median house price.
For example, in a market with 10 homes valued from $100,000 to $1,000,000, the median house price is the fifth home’s price.
What variables are used to determine the median prices?
All properties sold in a given location during a given time define a property’s median price. Variables that can affect the property median price in Melbourne are -
Location
Property location may significantly affect the median price. Properties in the city centre or affluent neighbourhoods have higher median values than those in less attractive places.
Property types
Condominiums and apartments have different median prices than single-family homes.
Size
Property size affects median house price. Larger homes have higher median values.
Age and condition
Older homes that need major repairs may have lower median values than newer ones.
Market demand
Property demand can also affect the median price. High property demand might raise the median price.
Learn More
These variables determine the median property price in a market. Appraisers and agents utilise this data to provide buyers and sellers with accurate appraisals and advice.
Get the Edge
Register Free
Your one-stop resource for everything real-estate
✓ Access Feasibility Suite demo’s
✓ Ask questions & clarify doubts
✓ Access real-life case-studies
✓ Participate in discussions & request features
✓ Post your project & get a video response
✓ Build skills, confidence and get the support to succeed
✓ Stay in touch & get access to all our Free Resources
✓ Access “members-Only” training
✓ It’s 100% Free
Why are median house property prices different everywhere you look?
It’s crucial to understand that median property prices vary greatly. The primary reason is location. For example, a rural area’s median house price may be much cheaper than a major metropolitan area.
Some other reasons for the different median house property prices are -
Economic conditions
Employment rates, earnings, and inflation might affect median house prices in a given location. The median house price may rise due to higher housing demand in a more robust economy.
Supply and demand
The median house price can also be affected by supply and demand. Buyer rivalry can raise median house prices if there are fewer properties for sale in an area.
Housing market trends
Housing market trends like interest rates, government regulations, and property market cycles can also affect median house prices.
Low-interest rates make it easier for consumers to get mortgages, which increases housing demand and median house prices.
Comparing median house prices across areas or marketplaces can take time and effort. Different sources may compute median house prices differently, resulting in disparities.
Why is the median price better than the average sale value?
The median price is a better indicator than the average sale value.
The median price is less impacted by extreme numbers or outliers, which can greatly impact the average sale value.
A high-priced house or a distressed property sold in a market might shift the average sale value up or down. This can misrepresent the sale price of houses in the target suburb or market.
Since it just analyses the middle sale price, the median price is less vulnerable to outliers. Thus, it better represents a market’s average house sale price.
The median price is considered while defining a report rather than the mean average price since it’s more accurate.
Why changes in the median price do not necessarily mean a change in your property’s value
Changes in the median price of homes sold in a particular area do not necessarily mean a change in the value of your property. The median price is computed from the prices of all residences sold in an area over a given period, usually a month or quarter.
Changes in supply and demand, local economy, and house mix can affect the median price. If more high-end properties sell in a month, the median price will rise, but your property’s value won’t.
Changes in the housing market, such as interest rates or government laws, can also affect the median price but not your property’s value.
A variety of factors, such as location, size, condition, and amenities, determine the value of your property. These factors can vary significantly from one property to another and are not necessarily reflected in changes in the median price.
The understanding of median price is essential for anyone pursuing a property development course, as it provides the basis for making sound investment decisions in the industry.
Interested in taking your property development skills to the next level? Check out our advanced property development course, designed to help you master the art of real estate development.
