Article By Katy Holliday
Thursday, October 17, 2019

Why‌ ‌it’s‌ ‌so‌ ‌important‌ ‌to‌ ‌buy‌ ‌near‌ ‌the‌ ‌Median‌ ‌Sale‌ ‌Price‌

When building a real estate portfolio in the Australian property market, proper analysis and understanding of the market is vital. In the course of your research on your chosen location and ideal properties, one aspect that is vital is the Median Sale Price (by suburb). 

There are two main reasons why you need to buy near the Median Sale Price. Read on to discover why this is an essential step for a successful investment

1. An indication of fair market value when buying

Your number one objective when purchasing an investment property is to maximise your investment return. In order to do this, you need to buy a property at or below its fair market value. 

The Median Sales Price is a great guide to ensure you pay the right price. It’s an important indicator of what the market is prepared to pay for the preferred type of dwellings in the area you are investigating. 

It’s never wise to pay above fair market value. When you purchase a property above the Median Sale Price, you’re handing over profit to the current seller and limiting your future capital gains. To avoid this we advise you buy a property at or below the Median Sale Price, but no more than 10% above. 

When you purchase a property that is the preferred dwelling type in the area, at the Median Sale Price, you increase your chance of buying an asset at fair market value, with the highest opportunity for price growth

2. An indication of where buyer demand is the highest

When looking to sell, buyer demand is crucial in order to make a profit. When you buy the ideal type of property for the area at the median sales price, there is a good chance that the value of your property will rise (or decline) in line with the median sales price growth.

The median sales price is where the highest number of buyers are interested and therefore where demand is the highest

When the time comes to sell, it’s best to list your property close to the median sales price too. This is where buying demand is the highest. This way, you increase your chances of a quick sale, setting you up for your next investment quicker.

Buying smart

As you research the investment property market, the following steps will help to ensure a successful investment. They are all available to you in the TUDI platform:

  • Check the past price performance of the suburb to ensure it has not already seen significant price growth.
  • Pinpoint dwelling types that are in the highest demand in the area. Whether that’s a house or unit and how many bedrooms. Purchasing a Preferred Dwelling Type will maximise your chances of selling later because it is those types of dwellings that attract the highest demand. Subscribers to the Free or Investor Plans have access to this information.

 

This graph on the TUDI platform shows the preferred dwelling type. In this particular suburb, by buying a 3 bedroom separate house you will maximise your chance of a quick sale.

 

  • And of course buy below or at the Median Sale Price for the suburb to give you the best chance to maximise your profit when the time comes to sell.

 

TUDI Suburb Reports show a range of important data insights including the Median Sale Price

Demand creates the Median Sale Price, as it measures the middle price of a group of properties sold. Buying a property close to the Median Sale Price is an effective way of ensuring that demand will be higher than in those properties at the high, or low-priced end of the market when comes time to sell. The Median Sale Price is your friend!