During Covid lockdowns the number of apartment sales in Melbourne and Sydney has ground to a halt which makes me wonder… what will this do to the monthly median unit price?
I don’t mean what will it do to apartment values as this is a slightly different question. The median unit price is the middle price (not the average) of all units sold in a particular area and between certain dates. If during lockdown there are very few apartments selling, then that middle number risks being skewed as the sample set is so small.
Every apartment is different and every month, a different set of apartments sell and each month those sales form the median unit price for that month. With a normal volume of sales the variations in sale prices between different apartments from one month to the next “wash out” so statistically it works. However with smaller volumes and perhaps certain locations or apartment types not being offered for sale, the median number of apartments sold may not be a true representation of the market.
You can read more about median unit pricing here but it is the property market’s version of a market index. However unlike the equities market where every BHP share traded is identical, each apartment is different so the index or median unit price has some limitations.
The apartment market is opaque at best and pricing is not an exact science. Expert valuers often disagree on an apartment’s value, and auction prices often surprise everyone, which demonstrates the subjective nature of apartment pricing. All this uncertainty demonstrates the importance of getting good advice, spending time to understand your specific asset and market well and the risks of using the median unit price as a proxy for valuing a change in the value of your apartment especially during times of reduced sales volumes like now.