The median house price is essentially the sale price of the middle home in a list of sales where the sales are arranged in order from lowest to highest price.<\/p>\n
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So in a list of 11 sales, it would be the sale price of house number 6, which has 5 lower-priced sales below it and 5 higher-priced sales above it.<\/p>\n
This is different to the average, which would be the total value of all the house sales, divided by the number of homes sold.<\/p>\n
Technically speaking, the median is more accurate than the average because it is less affected by a few unusually high or low sale prices.<\/p>\n
Median prices in properties are based on the homes that have recently been transacted and are most often divided into units and houses.<\/p>\n
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<\/picture><\/span>Note: <\/span>A change in the median price does not necessarily mean a change in your property\u2019s value.<\/strong><\/p><\/div><\/div>\n While median prices are a useful tool for understanding the price changes of properties that have transacted in a market, a 10% increase does not necessarily mean that your property is worth 10% more.<\/p>\n\r\n In fact, your property could have dropped in value during this time.<\/p>\n What it does reflect, however, is an activity in the market.<\/p>\n Look at it this way\u2026<\/strong><\/p>\n Here\u2019s another way of looking at it\u2026<\/b><\/p>\n Let\u2019s assume there were 5 home sales in your suburb last month as follows: $660,000, $725,000, $750,000, $770,000 and $820,000. In this instance, the median would be $750,000.<\/p>\n Now let\u2019s assume that a year later 3 these same properties go back onto the market and are resold for exactly the same price<\/strong> as they sold a year earlier (these properties are the ones with a price of $860,000, $725,000 and $820,000).<\/p>\n With these 3 sales, the median price is now $725,000 - $25,000 less than the median price a year earlier.<\/p><\/blockquote>\n However, as you can see, each of these houses did not lose any value when they were re-sold.<\/p>\n Clearly, the sample of sales here is small and not statistically significant.<\/p>\n The point I\u2019m trying to make is that to really understand what\u2019s been going on you\u2019ll need to look deeper into the sales that occurred over the period in question.<\/p>\n Scrutinising the types of properties that sold the previous month compared to the new data can be helpful - you might notice that those selling last month were primarily 3-bedroom brick houses, whereas this month more prestigious homes were selling.<\/p>\n This may suggest that the uptick in the median price isn't a sign that your property is increasing in value.<\/p>\n These may seem like interchangeable terms, but they are in fact quite different and it\u2019s important to understand this difference.<\/p>\n Median values tend to be a better statistical measure because they represent the figure other numbers congregate around, or in the case of our example, where most of the sales sit.<\/p>\n This is why it is predominantly used in the residential property market where a suburb might have hundreds of sales in a year, or even thousands of properties used to calculate a yardstick value for the area.<\/p>\n While median house prices are one of the most cited property market statistics as with any single measure there are some shortcomings that investors need to understand in order not to be misled about what\u2019s really happening to house price values.<\/p>\n Here are the main reasons not to trust median house prices.<\/p>\n Changes in median price statistics are more meaningful in determining property price growth in some areas than others.<\/p>\n For instance, suburbs where the properties are largely homogenous and therefore of similar pricing are likely to see the median price as a more accurate reflection of true value changes.<\/p>\n And suburbs, where many properties transact on a more regular basis, will also be more statistically meaningful than in areas where homes are tightly held, sell infrequently and are significantly different from one another.<\/p>\n\n
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<\/p>\nMedian vs. average home price<\/span><\/h2>\n
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Reasons not to trust median property prices<\/span><\/h2>\n
Median prices are a more valuable indicator in some areas than others<\/h3>\n
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