Whenever the median price as reported by the Real Estate Institute reaches a new high the ensuing story is always along the lines of “new high, prices buyers out of the market!”
However the median price, by its very definition is the mid point of the range of property sales during the period with 50% of all sales below this level and 50% above this level.
One would logically think that if sales follow a normal distribution then the majority of sales will cluster around the median price. However without access to the raw data from REINZ I am unable to verify this!
So being an inquisitive person I wondered if property listings as a representation of future sales might follow the logic of a clustered normal distribution around the median price for a region or city.
So to be clear the question I was looking to answer was - "are the majority of properties on the market in a specific area or region clustered around the median price?", in the case of Auckland $515,000 or Wellington $400,000 or Christchurch $350,250 (these being the median prices for September).
The short answer is no. This is where things get interesting as shown in the chart below.
The normal distribution for all listings of houses for sale in the major 3 cities is centred around the same price range $300,000 to $400,000.
Now clearly these lines on the chart do not represent normal distribution but they do reflect the distribution of listings by price range.
To carry out this analysis I used the realestate.co.nz website. I was unfortunately unable to access the raw data and therefore was restricted to using the standard price ranges as part of the search functionality. However I still find it fascinating that given the divergence of median selling price of the 3 cities from $350,250 in Christchurch to $515,000 in Auckland the largest selection (in % terms) in each region is to be found in the same price range of $300,000 to $400,000.
Having highlighted this interesting insight into the selection of property on the market I naturally was drawn to the next question "What would the distribution look like for other parts of NZ?"
At random I chose Whangarei (median price $257,750), Timaru (median price $260,000) and New Plymouth (median price $299,000).
The results speak for themselves in the chart below
So what can be deduced from this analysis?
Certainly it shows that there is choice in the market even at prices below the median price. There could be a deduction that Auckland is seeing a stalling of property sales in this bubble of the $300,000 to $400,000 range whilst the majority of sales occur at the higher range. It would be of great benefit to undertake this analysis on a more regular basis.
I do concede that this analysis would be better done with accurate raw data rather than using website search counts. Maybe the team at Realestate.co.nz could be encouraged to analyse their rich database to provide a more complete picture.