I am currently back in research mode… meaning our Brisbane location is almost coming to an end as I am increasingly finding it more difficult to get deals on houses… and if I cant steal it on price, I don’t buy it… for myself or my clients.

Using my property investing theories and searching for locations with a Median house price of under $350,000 that have quality houses that can be purchased for $300,000 or less, I am coming across areas that, in the statistics, are telling me that the Median house price is around $350,000 but you cannot buy a house there for under $450,000.

Now this, to the normal human brain, simply does not make any sense. How can the Median price be this low yet you cannot even buy a house anywhere near that price???

Before I answer, let me explain Median to those whom do not know the definition. The Median is the middle priced property that has sold in that given timeframe, say a month. Different to the medium, which is the average of all properties sold. For example here is a list of ten properties sold in a month:

• $480,000
• $512,000
• $429,000
• $559,000
• $488,000
• $437,000
• $550,000
• $525,000
• $499,000
• $486,000

So if we put these properties into price order from cheapest to dearest we have the following list:

• $429,000
• $437,000
• $480,000
• $486,000
• $488,000
• $499,000
• $512,000
• $525,000
• $550,000
• $559,000

Now the Median house price for that month is $488,000 as it was the middle priced property sold.

Whereas the medium house price is $496,500

This measuring tool is more effective than a medium as it is a fairer measurement long term. The medium could easily have been way out if, for example, instead of the dearest house sold for that month being $559,000, it was $1,600,000 then the medium would change to $600,600.

Now that might seem not possible in any given area but think about suburbs that have waterfront properties. If the 9 sales were all in the same suburb and were not waterfronts and one or two were and they were much higher in sale price, then this would have the same effect. It also happens a lot in regional areas where a larger farm estate could sell for millions but the houses in town sell for $300,000.

The Median allows for these not so popular sales, to not effect the Median house price of that area too much.

The problem, however is that blocks of land are also included in the Median. And this is where my research is leading me down many dead end streets…

When a new land subdivision is released and more than half of the sales for that month are blocks of land, the Median is then a lot lower than is should be.

For example:

• $160,000
• $160,000
• $160,000
• $160,000
• $160,000
• $160,000
• $372,000
• $385,000
• $389,000
• $401,000

So the Median here would be $160,000

A suburb that fits that criteria is Bokarina where the Median house price is $450,000 and the cheapest house for sale is $519,000.

On the other end of the scale, when a new suburb is created and all the sales are blocks of land, typically within approximately 18 months of settling on the land, there are houses put onto a reasonable percentage of those blocks. The block sales then decrease and then some of the new houses that have just been built are sold. Due to these new sales, the Median house price then increases dramatically. This typically causes a flurry of buyers to the area as they see a large jump in Median house value… What they have missed is that the large jump in Median is a direct result of those same blocks being resold but now with a house on it for a lot more money.

This is also true where suburbs have many Granny Flats constructed behind established dwellings.

They have been misled by the same culprit… a misleading Median house price.

The solution, that blocks of land are categorised differently to houses, just like strata properties are currently. Then we can see a true reflection of land price Median verse house price Median.