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The Median Price Trend Formula
Step One:

Use the most recent sale price of the property, and then divide this by the median price in the suburb at the time of purchase.
Sales price / Median price at the time of sale = Index

For example, if the purchase price in June 2017 was $900,000 and the quarterly median price for the suburb was $1m, then the index would be:

900,000 / 1,000,000 = 0.9.

Step Two:

Now using your index number, multiply the current median price for your suburb to estimate the value of your property today.

Index x Current Median sales price = Approximate Property Value

If the median price is now $1.1m then 0.9 times $1.1 equals $990,000.

This formula may not work in the following circumstances:

  • There has been a renovation or extension to the property which adds value

  • The zoning of the land has changed which may affect prices either up or down

  • What else can be purchased for the same or less?
  • The suburb you live in has a volatile median price.
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Case Study – Booming Market

When 21 Asquith Street came on the market in March 2015, I instantly thought it was waaaaay overpriced. Living in the area, I knew it had sold recently for under $1m, and a quick Google of the property confirmed I was correct. Just 18 months earlier the property had sold for $985,000. No improvements had been made to the property, and now they wanted over $1.4m!

The median price at the time of sale for Box Hill South was $781,000.

Based on this:
$985,000 / $781,000 = 126%
Source: REIV.com.au

In other words, using the median as a base (which was now $1,165,000), this property was worth about 126% of this figure. So when it came up for sale again, and the price advertised was over $1,400,000 it seemed unrealistic. But by applying the Median Price Tend Formula to the index, it proved to be spot on. If we do step two of the process and look at the recent median price, it will give a figure for how the market is overall valuing the property.

126% x $1,165,000 = $1,469,000

The property sold at auction for $1,487,000. Only $18,000 (0.2%) off the trend of the median price!
Win Win Property
PO Box 2023
Forest Hill VIC 3131

chris@winwinprop.com.au

0421 301 040

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