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What’s the difference in Adelaide?

What’s the difference in Adelaide?

By KIERAN CLAIR

Quartile price gaps could point the way to cheap South Australian properties with potential upside, but only if you’re smart with the data.

When considering where to invest in a capital city, many buyers take a long hard look at median price and quickly decide whether they can afford to take the plunge. While it’s a useful number, buyers need to realise that you can’t reduce a market to a single figure. There are multiple properties of varying quality throughout any locality that provide investors with options to get in.

Quartile data paints a broader picture for buyers. Quartiles help describe the upper and lower price points of a market, and given the vast majority of investors want to stay below the median, this information is invaluable.

What are quartiles?

Lower (or first) and upper (or third) quartile price points are identified by looking at the full range of sale prices that occurred in a suburb over a set time, and identifying the 25th percentile sale and the 75th percentile sale.

So if, for example, you ranked all the sales in a suburb for the year from the least expensive to the most expensive and there were 100 sales overall, the lower quartile price point would indicate the price of sale number 25, and the upper quartile price point would show the price of sale number 75. The price of sale number 50 would be the median.

DIAGRAM 1

diagram11

Another way to study quartiles is to look at the gap between the upper and lower points. In theory, this gap can indicate how much upside an investor might enjoy if they buy cheap and look to improve their equity.

Numbers across Adelaide

CoreLogic RP Data has produced analyses showing the Top 10 suburbs each for houses and units in Adelaide with the greatest difference between their lower (first) quartile and upper (third) quartile price. These are theoretically the suburbs where you can expect the most upside between the cheap and the dear real estate.

DIAGRAM 2

diagram2

Paul Siwek, buyers’ agent at Logica Property, says different sectors within Adelaide are performing at different paces.

“There is no single ‘market’. Quality inner suburbs currently suffer from a significant stock shortage of detached houses in the lower and middle price points, which drives their prices up, while the upper end is generally fairly flat.

“Renovated units in upper end suburbs are popular while the unrenovated ones less so. Renovated medium-priced family homes in the middle-ring suburbs are popular and prices have gone up, often over 10 per cent in the past two years or so. The same applies to potential development sites.

“Many other areas had modest price increases though, so it is very much a ‘mixed bag’ situation. Consequently, the aggregate stats for the whole of Adelaide can be quite misleading.”

Siwek’s take on the quartile data is that it can be useful but you need to apply sharp parameters to make it truly meaningful.

Paul Siwek

Paul Siwek

“Take the houses, for example. All the suburbs on the list are in the Adelaide top 30 suburbs – many in the top 10 suburbs. Houses there vary greatly from relatively modest courtyard three-bedders to massive mansions on large blocks, and the land values are well over $1,000 per square metre. Consequently, the first and the third quartile properties are completely different. It is like comparing apples with oranges.”

Siwek says correctly performed quartile price analysis is probably most useful to renovators looking to flip a property for profit, because an above-average quartile difference might indicate corresponding above-average profit or equity increase potential.

Despite the limitation on using purely the price differential data, Siwek says the listed suburbs are reasonably appealing for investors, although there are areas of caution.

“I would also be careful with the beachside suburbs where the distance to the sand dramatically influences values. It is important to examine the list of individual properties before trusting the data.”

Siwek believes there could be value in seeking bridesmaid locations adjacent to the blue-chip addresses described above. These areas can benefit from the premium suburb’s facilities but present a cheaper buy-in in many cases.

In terms of “top picks” among the house list, Siwek has stayed just south of the CBD.

“Hyde Park and Rose Park, since there is a good selection of character houses on smaller blocks thus offering a lower entry point, yet the locations are great in terms of amenities and overall lifestyle quality ensuring strong demand.”

In terms of units, he believes any of the eastern or inner-metro beachside suburbs have shown a consistent history of long-term capital growth, but their appeal will depend on the investor’s preferred strategy.

Quartile data is certainly a bullet that has its place on the investor bandolier, but it’s not silver. You must sharpen this tool in order to use it effectively, and those who shoot from the hip without considering all the metrics and assessing the risks could be in for a self-inflicted fiscal wound.

About Kieran Clair

Kieran Clair is the Editor of Australian Property Investor. He had almost 23 years experience as a registered property valuer, freelance writer and commentator before joining API in 2013. After three years as an award-winning journalist with the magazine, he was appointed Editor in 2016.

Original author: Kieran Clair
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