In this post Cam discusses why median property prices are irrelevant!

As a 7th former I struggled to get a final year exam mark of 54% in the subject maths with calculus. At the same time a mate of mine was also struggling with the subject — to break 90% (groan). You could rightly say maths is not a strong point for me and rocket scientist was crossed off the list of career choices!

However, during that final school year I learned about the bell curve and importantly I learned that it has three characteristics that concern us today. The bell curve has a mid point. And it has values which are higher than the midpoint and values which are lower than the midpoint. So when I cracked open my exam results to reveal that dismal score, I took heart in the knowledge that about half the other people who took maths with calculus did worse than me, some way worse.

With the benefit of a debt funded university education which was fuelled by a unique combination of hops and malt I began to realise that this thinking could apply to all areas of life. Yes, I believe it applies to property prices too.

Let’s look at the median price of property in three suburbs of Auckland’s North Shore — Glenfield, Beachhaven and Birkdale. West of the northern motorway, these suburbs are a typical hunting ground for the first timer. Lets also take a moment to reflect on the implications of the bell curve — that half the property in those areas will be under the median price.

A quick look at Trademe reveals heaps of property priced below the medians as the table shows. In fact I have two clients who have purchased property in the last few weeks to prove the point — one purchased in Glenfield for $360,000, the other in Birkdale for $250,000.

Suburb 2 bedroom average price 3 bedroom average price Number under average price on Trademe
Glenfield 400,000 428,000 58
Beachhaven 370,000 403,000 26
Birkdale 363,000 396,000 16

This data is sourced from QV, July 2010.

Ok, so some of the properties won’t suit all tastes while others require some elbow grease to bring them up to a standard you’d be happy(er) with. The point is that it doesn’t matter what median property prices are — as a first timer, you should be aiming to be in the bottom half of the bell curve anyway. Even someone who gets 54% in maths with calculus can tell you that.

 

About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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