Yes, Numbers Can Lie

Written by Paul Kounnas | Thursday, 12 May 2011

You can influence the way people dance by the music you play. You can also, just as easily, make numbers dance to your tune.

How is it possible to make the wrong numbers look right?

Let us look at the weekly reported auction clearance rates as an example. The auction clearance rate earlier this month was reported as 61%, but it could just as accurately been reported as 43%. How can this be right?

If you were to count the number of properties sold at the fall of the hammer ...

on the day of auction and divided it by all the properties booked for auction for that same weekend, you will have a correct clearance rate of 43%.

The reported figure of 61% however is also accurate, if you agree with the following reasoning: If you add to the auction results the number of properties sold by private negotiation before the auction, as well as the number sold by private negotiation after the auction, and you ignore the number of auctions that were not reported or withdrawn, you’ll then get a 61% clearance rate. Which calculation is right? Both figures can be justified depending on which numbers you pick to support your argument.

Which figure do you think more accurately represents the true clearance rate?

As you can see, it’s not hard to make the wrong numbers look right. It simply comes down to which way you want the numbers to dance.

Next time someone says to you, “numbers don’t lie”, perhaps you will now be a little wiser with how you wish to respond. You’ll know that their maths may be correct but the problem is they may have deliberately selected the set of numbers that justifies their reasoning and proves their cause.

Auction results can be handy for interpreting market sentiment. They can give us a regular snapshot of the market. But don’t forget that auctions only represent a small sample of the market. Australia-wide, auction sales represent less than 20% of the market.

Melbourne is Again Voted the Best City in Australia

Written by Paul Kounnas | Thursday, 21 April 2011

In an annual global survey conducted by the Economist Intelligence Unit, Melbourne has again scored higher than any other Australian city to be ranked as the most liveable.

On the world stage Melbourne came in second place behind Vancouver, topping the list of the world’s most liveable cities for the fifth time.

Melbourne’s popularity may well be a contributing factor and one of the driving forces behind its recent strong growth in property values.

The demand for property in Australia’s most liveable city provides another reason why property prices are not likely to crash but more likely to ...

rise in the future. The annual survey conducted by the Economist Intelligence Unit ranks cities on a combination of 30 factors such as culture, environment, infrastructure, education, stability, healthcare, cost of living, crime rates and personal safety.

The Cost of a Vendor Bid

Written by Paul Kounnas | Thursday, 07 April 2011

From the reported number of properties passed in on vendor bids every weekend, it appears that there are growing numbers of buyers who refuse to bid at auction after the auctioneer has made a vendor bid.

A vendor bid is an attempt by the auctioneer to push the buyer(s) up on price, by pretending the vendor is another interested buyer. But in the absence of genuine competition, would any astute buyer fall for this?

The only reason the bidding starts so low with so many auctions is because the agent deliberately advertised the property for ...

less than the reserve price to attract more buyers. Then, on the day of the auction the auctioneer is forced to make vendor bids, as they try to push the price back up to the reserve. Wouldn’t it make more sense to be honest about the price and start the bidding at the vendor’s reserve? How much more efficient would this be? All genuine buyers would then be forced to compete, because if they don’t bid, the property will be sold and they will miss out. This will create real competition with positive results for vendors.

If there are no buyers prepared to bid at the reserve price, it simply means that no one is willing to pay that price. It’s a sign that the market price for the property is not as high as the vendor’s expectations. If the vendors want to sell they would then have to adjust their price.

With the current process as it is, when the auctioneer is forced to make a vendor bid, they are announcing to everyone that there are no buyers for the property at that price except the vendors. Alternatively genuine buyers could be waiting for the property to be declared on the market before they start bidding.

How much more efficient and transparent would it be if the auction process started at the reserve and the property was immediately on the market. This will go a long way in eliminating much of the dishonesty on price given by many agents to buyers and sellers.

Vendors don’t realise how much they can lose using the current auction process. When buyers refuse to bid against a vendor bid it puts pressure on the vendors to lower their reserve. When it’s finally passed in, again there’s pressure on the vendors because buyers can now negotiate a lower price knowing that the last bid was the vendors and not a competing buyer. Either way, the vendors lose.

Is This the Season?

Written by Paul Kounnas | Thursday, 03 March 2011

A national analysis conducted by RP Data found that over the last decade, March is the best month of the year for selling.

Contrary to common belief the research shows that spring is not the busiest selling season. The season with the highest sales volume according to the research is autumn. The sales data also revealed that summer is the slowest season of the year.

If autumn is the best selling season then why are most vendors listing their homes for sale in spring when the sales are not at their highest level?

As with many things in life, the decisions we make are ...

based on perceptions and on what we are led to believe. The gap between perception and reality can often be wide. The popular opinion fuelled by media hype and by many agents that spring is the best time of the year to sell, is wrong. It is true that in spring the gardens are looking great and the good weather brings out more people looking at properties. But more people looking at property does not necessarily mean more buyers. The spring season seems to be a busier time of the year, with more people looking, but the sales evidence clearly showsthere are more genuine buyers purchasing property in autumn.

So why is all this important to you?

Well, if you are thinking of selling, don’t wait until spring. The results would suggest that you put your home on the market in March. This is the month and the start of the season where sales rates are at their highest. It’s obviously a time when there are more buyers purchasing property than any other time of the year. The figures confirm that real estate agents are more often successful at converting a listing into a sale in autumn than in spring.