When “The Market” Doesn’t mean The Market

It’s pretty easy to get into a conversation about real estate. Everyone has an interest in it one way or another and everyone has an opinion that is mostly based on media portrayal of “The Market”. Most of the time the media is giving the public information that is incorrect, biased or simply irrelevant.

Let’s firstly look at the media’s favourite way to tell us how “The Market” is performing. Auction Clearance Rates. Clearance rates rarely paint an accurate picture of the market’s performance; in fact, they mostly just tell us how well the auction selling process works (usually not too well). For example, let’s say the media reports auction clearance rates at 75% – that 75% includes homes sold prior to auction, sold at auction or sold after auction. The overall percentage is calculated on a total of the “reported auctions”, so if a home owner or agent doesn’t disclose a failed auction it isn’t included in the overall rate. Home owners are being misled to believe that by using the auction process they have a 75% chance of selling their home at auction, when in fact that rate is more likely to be 30-40%.

Now let’s talk about “The Market”. There are over 40 local government areas in Sydney and around 850 suburbs. All these suburbs perform differently at different times. There is no way you or your agent could possibly use a Western Sydney home sale as a comparable for a Kirrawee home, yet we allow the media to do this all the time when we see newspapers or blogs with the headline “Sydney Market Drops by 10%”.

Now although this may be the case for 5 or 6 of the Local Government Areas in Sydney, it certainly isn’t a reflection of the entire Sydney Market. By getting caught up in the media’s portrayal of the “Sydney Market” you may miss out on buying or selling for the right price.

The media isn’t necessarily doing anything wrong here, they are adhering to a wide audience so they have to condense their articles. However, if novice real estate investors, purchasers and sellers take this advice without doing further research into the actual location they are looking to buy they will surely get burned in the long run.

So when it comes time for you to be more involved in the market than a sideline spectator you need to be armed with the correct information. Get this by doing your own research. The internet is a great tool to look at homes around you that are comparable, most sold prices are made public straight away. If you are a buyer make sure you are seeing as many properties as you can, follow up on them when they sell and generate your own indication of pricing and buyer interest in the market, you may be surprised to see that whilst the media may portray the market as slow and underperforming you are actually in competition with several buyers prepared to pay a good price for the same property you want to buy.