What is median price?

 

If you’re going to understand one term when it comes to property data then median price is probably a good one to start with!

We often hear about how property prices are up or property prices are down and it’s the median price that is the indicator referred to in this instance. Basically, the median price refers to the middle price in a given set of numbers such that half of the numbers are lower than the median and half of the numbers are higher than the median.

Median Price - Property Investing Terms

Just to clarify, this is not the same as the average price and can in fact, be very different. So for the same set of numbers, the average price is:

Average Price - Property Investing Terms

So why do we use the median price rather than the average price when talking about property?

Well, it comes down to the way the property prices are distributed in an area. Generally when data within a data series is symmetrically distributed then the average or mean is fine, however, when data is not symmetrically distributed, as you’ll often find in property prices, then using the median can be a better reflection of the ‘average’ value. This is why the median is the preferred price used to discuss property prices.

Capital growth is measured by looking at the changes in median price over time, so you will find measures that report on the quarterly median growth, annual median growth, 3 year, 5 year and 10 year median growth and these are handy for looking at historical pricing trends in a location. Remember though, history is history and capital growth prediction requires you to look at a range of factors that may drive growth in an area.

Good luck!

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