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What do we mean by ‘median’ price?

The median sale price for a house in Perth recently dropped to $490,000. Real estate in Wanneroo is sitting at a median sale price of $399,000, while Baldivis home prices are at a median price of $442,500. But, what exactly does ‘median price’ mean?

The median is the middle price in a range of property sales. In other words, if you have a list of sold properties arranged in order of cheapest to most expensive, then the median price is the centre point of that list.

This should not be confused with average price. The average is calculated by adding the total value of sales from a list and then dividing the answer by the number of properties sold. That’s a different figure.

The median price is commonly published by REIWA because it’s a better indicator of changes in the general real estate market than is an average. It’s not affected so much by a handful of very high or very low priced sales, as an average figure can be. The median broadly illustrates the purchasing habits of buyers, it’s a measure of consumer sentiment and general market conditions.

As it’s a good indicator, the median is widely used to estimate the selling price. If the median is trending up then the seller would be more inclined to expect a higher price in the near future. If the median has already risen significantly over a long period then there may be a lesser likelihood that a property will sell for more than comparable ones.

When it comes to assessing a likely price for a property, the trend in the median is only one factor to consider. The other important factor is evidence of sales prices with comparable properties. This is public information and should be discussed with your real estate agent.

The agent selling the home should also be in a position to show evidence of recent sales that may have not been published yet. Most sales take several weeks for settlement to occur, during which time market conditions may have changed.

Setting accurate sales prices for some properties is difficult if there are few comparisons. This can happen if the property is out of character with others in the street or has one-of-a-kind feature. Often such properties are auctioned. However, even with an auction the seller and agent would need to consider a likely selling price in order to set the reserve price.

The median price is especially useful for investors who want to assess the change in value of their asset, so long as they consider the property is comparable with the broad range of property sales that the median house price in an area is measuring.

Median house sale prices for every Perth suburb including Bateman, Cottesloe and Subiaco are available. For more information, please visit the reiwa.com.au web site.