A: The median price is the middle price in a series of sales, where half of the sales are of lower value and half are of higher value.
For example, assume there were 51 sales recorded in a suburb and arranged in order from lowest to highest value;
the 26th figure is the median price of the suburb. In other words, there will be 25 sales priced below the median and 25 sales priced above the median.
An average price is different to a median price as it is a representative measure of a range
of prices that is calculated by taking the sum of the values and dividing it by the number of prices being examined.
Median prices may be a better indicator than average prices because median prices are unaffected by outliers (an extreme value
which is unusually high or low that differs greatly from other values), making them a more accurate indicator of true market activity.
Nevertheless, medians are generally used to reflect an overall trend in house prices over a certain period
of time and is used as a guide only. It does not describe the individual value of properties in a particular suburb, so it is important to note that along with median price, there are many other factors to be considered when seeking the sale price for
a particular property, including, but not limited to;
- the condition of the property
- age of the property
- level of competition between buyers
- vendor’s preferred price.
While the median price is regarded as presenting a more accurate measure of true market activity, the sample size is also important with 30 sales considered a reliable sample. Below this, the sample may be subject to bias and present undue volatility.
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