Lies, Damned Lies and Statistics

Statistics are all well and good if they are used correctly and applied to relevant situations. How often do your clients declare themselves Real Estate experts based on something they saw on TV? Empowering yourself with sound local knowledge could be one of the most important things you do. Tony Rowe gives his opinion.

One of the things that makes life difficult for most agents is the messages that are sent through the media via the commentators and experts who are able to summarise the state of the market for all the punters out there who want to know. They talk about the “Sydney property market” or “the Australian property market” or the “Melbourne property market”. They often refer to a singular market condition and quote statistics to back their opinion.

Median house prices in Melbourne are at, or above, or below, five year averages. Sydney rental vacancy rates are at less than 1.4% – a sign of dire things to come, of rising rents, of supply issues for the next x years. The “data” is used to predict what is going to happen to the Brisbane property market.

The only problem with all the data used by the commentators and “experts” is that there is no singular market to which the information and numbers can be applied. What happens in the eastern suburbs is different to what happens in the north, south or western suburbs.

Every agent in the country knows that there are vast differences even within suburbs or towns let alone district, region, or state. There is no point talking about the “Adelaide property market” – because what the statistics reveal about the generic Adelaide market, bears little relevance to what actually happens in Brighton which is very different to what happens in Elizabeth and Blackwood.

Newspapers and TV are not particularly interested in the micro-environment of the specific areas an agent usually works. The difficulty for agents is their clients read the papers and watch TV – and get their “knowledge” from there.

The challenge is for agents to use their local statistics to provide clients and potential clients with relevant information that is as factual as it can be. It has to be based on local circumstances – to be able to counter the noise of the generalisations from the media. There is no substitute for agents being up to date with their local area statistics and being able to demonstrate that local knowledge to their clients and potential clients.

There is no better way for agents to secure a sale or grow their managements than to be able to show they “know their stuff” about the area and the specific property they are trying to sell/let/manage. Of course, they need to be able to effectively and efficiently convey that information, as well as know it!

Estimating sale price is an imprecise science. No two properties are the same. No two vendors are the same. No two buyers are the same. Agents know that.

Working out what a property will sell for on any given day is (at best) a “guesstimate” based on previous sales in the area. Agents need to be able to “justify” the price guide provided to clients. Local statistical information is necessary for that.

Removing the emotion from that “guesstimate” and basing it on sound knowledge is important. Statistics play an important role for the agent in endorsing their “opinion” – in underpinning their claim of professionalism. However, those statistics need to be local, relevant and current.

It’s not easy, but it is absolutely essential for agents to have a clear, sound understanding of the things that impact on the local market. They need to be able to balance the views of the “commentators” and be “local experts”!

An agent with limited local knowledge is not good for the industry.

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Tony Rowe

Tony Rowe is the CEO of TT Rowe and Co, a compliance, education and training consultancy providing specialist advice to the property industry in Australia.