Understanding property data
An important part of researching a potential property investment is accessing and interpreting good data.
But where can you get that data and what does it actually mean?
Property data is available from a number of sources ranging from paid subscriptions, magazines and newspapers. With the increased use of smart phones some of the major lenders have even created iPhone applications specifically for property data.
Interpreting property data
Interpreting data from a variety of sources can be like comparing apples and oranges; so try to compare apples with apples.
Raw data comes from many places and sources, and the same data can be used in a number of different ways to come up with completely different results. Here are a few things to keep in mind when looking at property data:
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Is the data on the same type of dwelling (e.g. four bedroom house or two bedroom unit)?
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Is it only based on sales in the area (which can incorporate different sized dwellings, e.g. units and houses)?
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Is the data based on the median sale price or the median value?
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Is the data pulled monthly or quarterly?
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Is the data pulled from capital cities only or does it also include regional areas?
- Is the data correct and not inflated or old (due to the nature of purchasing a property and the time it takes to process sales, some data can be over a year old)?
Keep in mind that 68% of the population live in major cities, so the remaining 32% are in regional and remote areas and property sales happen there as well. Cities and regions are completely different and when looking at the figures you need to take this into account.
Median sale price or median value?
Some analysts use the median sale price to reach conclusions, and others use the median value. So what is the difference between the two?
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Median sale price: the middle figure of all sales that have taken place in a suburb
- Median value: the middle figure of the value of all properties in a suburb.
One of the property data providers, Residex, uses median values for their data. This is because they believe that the median sale price only shows changes in buying patterns, not actual changes in the value of properties. If the median sale price is used you don’t necessarily see the changes in the growth of each property, only the changes occurring in the location.
Find out more about Residex by visiting http://www.residex.com.au/
Another property data provider, APM, takes a quarterly view of property price movements rather than publishing prices monthly when sales data is continuing to filter in.
According to APM, this gives them a broader, more comprehensive set of property data to analyse and therefore provides an accurate representation of property price movements as well as consistency over time.
It is worth noting that APM’s House Price series (published quarterly) is used by the Reserve Bank of Australia as well as Australia’s major banks, Government agencies and real estate professionals.
Find out more about APM by visiting http://www.apm.com.au/
Stay objective
There’s plenty of information out there so make sure you’re comparing apples with apples, but don’t get too caught up analysing the data. Stay objective and use the data as an extra resource only, not as a definitive answer.
Keep an eye on all the numbers that are published and maintain a balanced and objective view.
Six tips to get ahead on your home loan
A home loan is the biggest debt that most of us will have in our lifetime.
Here we give you some sound advice on how to take some simple steps to reduce the length and total cost of this debt.
Whilst we may love our homes, the relationship with our home loan is another matter entirely. Here are six tips to help you reduce the term and cost of your home loan.
1. Plan to pay it off sooner
Loans are typically taken over 25 or 30 years. The longer you take paying off the principal the more interest you pay along the way and the higher the overall cost of the loan.
Use a repayments calculator to develop a plan to pay it off in less time, and increase your repayments accordingly. Once you've made the commitment simply adjust your budget, and in no time you'll be used to the new arrangement.
2. How often do you pay?
Make more frequent payments. As interest is normally calculated daily, any repayment has an effect from the day it is paid. Therefore if you’re paid weekly or fortnightly, make a payment at the same time. Paying just a week or two in advance for part of the due amount will have a noticeable effect on the interest you pay and the overall term of your loan.
This can also be a simple way to increase your repayments. For example, if you’re paid fortnightly then simple divide the monthly repayment by two and pay that. This will mean that you are actually paying 26 fortnights in 12 months which means that you’ve effectively made 13 monthly payments in the year.
3. Deposit any spare cash into the loan as soon as you can
Making extra repayments at any time is a good strategy. But remember the earlier the better, thanks to the power of compounding interest over time.
Make sure your home loan has an easy, “no charge” redraw facility in case you want to use the money later.
4. Have your income paid into your home loan
Provided you are careful to keep track of your expenses, this may be one of the best ways to use your existing financial resources to reduce the cost of your loan.
Have your income paid directly into your home loan and manage your day-to-day expenses on a credit card with an interest-free period. This way you keep the home loan balance as low as possible for as long as possible, so reducing the interest which is calculated daily on the outstanding balance.
5. Don’t reduce your repayments
If your minimum home loan repayment drops because interest rates fall, don’t lower your repayment.
By maintaining your repayment at the original level you won’t even notice that you’re paying extra, but you’ll be reducing your home loan faster.
This also means that when interest rates rise again that you won’t have to pay extra – unless you can afford to.
6. Get the right home loan
It’s important to have the right home loan to take advantage of these tips and to save money.
If you'd like to confirm that your loan is the best one for your needs, please get in touch for a free "home loan health check".