Crunching the numbers

How important are statistics and what bearing do they have for investors looking into property? Before we get to the answer to this question it is important to know the current statistics.  According to the June FNB House Price Index there has been a minor acceleration to 2.6% year-on-year growth from a revised 1.8% in May. If one adjusts this slight growth rate with inflation, real house prices have declined at a rate of -2.5% per annum as at May 2011. The Consumer Price Index inflation is at 4.6%, which is still much higher than property price growth.

So back to the question of how important statistics are for property investors. Goslett answers that knowing how much a property is truly worth (which can be ascertained through gathering relevant statistics) is vitally important whether you are a buyer or seller.

“Property buyers would want to know whether they are making a wise investment choice, and this can only be decided once they have researched and obtained the actual numbers and undertaken a comparative analysis with regard to pricing and types of properties that have been sold in a specific area,” says Goslett.

According to Goslett, statistics provide a record of every deal that has already taken place as well as provide information about the history of several deals on one property. He notes that statistics are of utmost importance for estate agents and professionals working within the industry as they use them to provide a reasonable reflection of the real estate market in a specific area. They allow agents to gauge the market and possible trends in certain areas and will give the agent an idea of how to accurately market a home and price it correctly so that it is sold for a fair market value within a reasonable amount of time.

“From an investor’s point of view, statistics will give an indication of how property has performed in a certain area over a set period of time and will make it much clearer as to what to expect with regards to the performance of the market in the future,” says Goslett.

He adds that real estate statistics can largely influence a property buyer’s decisions.  If profitability in certain options is suggested by the information that is at hand, then buyers are more likely to opt for these investment choices.

Goslett notes that the two main statistics that are looked at by industry professionals are the number of properties sold in an area over the last two years and the average price thereof, along with the square metre measurement of the stand and buildings on average.

“However,” says Goslett, “before investors take any statistics into consideration, it is imperative that they know that the information is obtained from a reliable source. It is also important that they make sure the information is still relevant and is not outdated.”

Statistics will only be of value if the source is trust-worthy and the information is interpreted correctly.  Investors will not always understand the sometimes complex statistical analysis of property markets and because of this, consultations with renowned companies and highly regarded agents will help them to understand the information as well as create a more accurate estimate concerning their return on investment.

“When in doubt it is best to consult an estate agent that will be able to provide you with a Comparative Market Analysis (CMA) based on statistics received from reputable sources such as deeds office data. They will also be able to correctly assess the information and guide buyers and sellers as to what the information is actually saying,”
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