Growth Averages Can Be Misleading

Thursday, November 12, 2015 / Property Investment

When people talk about property value growth, it can become a confusing time for some.

When we look at the national figures, the state figures, the city based figures and then the suburban figures; it can all become a little hazy as to exactly what growth means.

The big thing to remember, is that when a figure is placed against the entire nation, then this is taking into account every single property within the country, and like wise when a state wide figure is displayed, it is once again taking into account every property within the state.

Core Logic RP-data shows that the overall property value growth for Australian capital cities in 2014 was 7.9%

That is not to say however that every property increased in value by 7.9%, this is only an average built upon by every single property in an Australian capital city.

We see this broken down by the fact that each of the capital cities grew at a much different rate to one another:

Sydney 2014 Growth of 12.4%

Brisbane 2014 Growth of 4.9%

Melbourne 2014 Growth of 7.6%

Adelaide 2014 Growth of 4.3%

Hobart 2014 Growth of 3.5%

Canberra 2014 Growth of -.6%

Perth 2014 Growth rate of 2.1%

Darwin 2014 Growth rate of 1.6%

Non-Capital Cities 2014 Growth rate of 2.9%

As we can see, it is a far cry from being able to simplistically state that property values grew by 7.9% for every home in Australia, as the location within Australia itself plays a huge role in the actual growth rate that can be expected.

The averages are compiled from every property, so whilst some areas will perform well above the average (such as many properties in Sydney) there will also be some areas that perform well below the average (such as Canberra).

The Data is then Broken Down Even Further

Even looking at a city average, this still is not enough to make a blanket statement about the property growth that can be expected (or observed) for an individual property within the region.

For example, whilst Canberra as a whole recorded a .6% property decrease in value, if we take the individual suburb of Crace in the ACT as being a 21.6% growth rate, even though Crace’s direct neighbour suburb of Giralang only grew by .7%

Similarly, we see in Adelaide that the suburb Seaford Meadows grew by 20.1%, whereas the neighbour suburb of Seaford grew by only .9%

This information only highlights further that it can be misleading when we see national or city based growth rates, as there can be a significant difference in which suburbs within those cities are actually growing in value.

If we only took the city wide explanation, then we may be overlooking fantastic investment opportunities. For example if we looked at the Canberra average of -.6% growth, we may have falsely decided that investing in Canberra is simply not a good option, even though there are suburbs in Canberra such as Cracie that have had significant growth in the last 12 months.

A Lot More Research Needs to go into Establishing Potential Value Growth

Researching for your next property investment will never be a simple process, and it should never be simply based solely upon a city wide growth value.

Your research should be conducted with an experienced property strategist, and take into account much finer detail than you will be able to find from broadsheets and headlines about particular cities or regions.

Whilst national and state averages play their role in establishing where values are increasing; by showing a wider trend, they are not the be all and end all in establishing whether a particular region is potentially going to play home to a successful investment.