How spruikers misuse past performance stats
It’s human nature for us to exaggerate when talking up our achievements. We tend to embroider facts about our relationships, families, work and homes, placing them in the best possible light while we push any uncomfortable truths which don’t fit our picture of perfection into the background.
Sales people do exactly the same, but we often don’t realise what they are doing because we want to believe the best about something we are about to buy. This is why project marketers, sellers’ agents and property spruikers will dress up their potential property investments to look their absolute best and why they get away with it.
This suburb has enjoyed Impressive past performance
When talking up an area’s past price performance, they will look for the stats that suit and ignore those that don’t. As this table shows, a spruiker selling property in Moranbah would tell you that house prices there have boomed by nearly 20% in the last year, not that they are still nearly 40% lower than they were five years ago.
A sellers’ agent trying to push property in Springvale South, however would show you that house prices have shot up by 50% in the last five years and ignore the fact that they have fallen by over 10% in the last year.
The area’s population is about to increase dramatically
Another commonly misused stat is projected population growth, trotted out to show you that an area is about to experience a substantial rise in population and therefore in housing demand. The stats used may relate to an entire region, such as South-East Queensland, and may have no effect on demand in already established suburbs.
It is also critical that any population projection indicates what types of households will be arriving, the types of housing they will prefer and their expected length of stay. For example, the predicted rise in population may be for retirees, which would have no effect on first home buyer locations, or construction workers whose need for housing will be short term rentals.
These stats can be twisted to tell almost any story and mislead prospective investors. Even more important is the fact that while more households create more demand for housing, this will only lead to price growth if the supply of new houses falls behind the demand for them.
This infrastructure project will cause a massive rise in housing demand
Perhaps the sneakiest claim of all is use the of “infrastructure” in the spruiker’s bag of tricks to predict a housing market boom for areas where they are selling property. The project could be a new hospital, university, shopping centre, railway line, highway, airport or mine, and is often used to support their claims that housing demand will shoot up as a result.
The facts are that most infrastructure projects do not increase housing demand at all – they create demand which is directly related to their purpose – hospitals for sick people, universities for students, shopping centres for shoppers. Even railway line expansions, highway duplications and new mines may employ fly-in-fly-out construction workers on family friendly rosters, which means that any rise in housing demand will be where the construction worker families live and nowhere near where the project is located. Even more importantly, many infrastructure projects are altered, cut back, delayed or even abandoned altogether before they even start.
Check everything that they say – and then look for what they left out
Always be wary of any stats boasting impressive past price performance results, high population growth projections or claims that a rise in housing demand will be driven by new infrastructure projects. One good method to evaluate any spruiker’s claims about a potential property investment area is to check the origins of their stats – is this information sourced from reliable, independent and recognised data providers? Then check what they have left out and why:
- Will new households really be moving into the area?
- What types of housing they will refer?
- Will the new housing developments in the area lead to an oversupply?
It’s only natural for project marketers to talk up the benefits of investing in their new property developments, so it’s essential that you do your due diligence in establishing the accuracy of their claims.