Data: There’s a story to be told

9 August 2021

By CATH DICKINSON

Data is easy to come by these days. Property sellers and buyers have access to so much of it with a simple click of the mouse. But what is the source of that data, how should it be interpreted and what story is it really telling? Here’s how you can cut through the confusion for your clients and use data to tell the full story.

The ability to understand and interpret data is important for agents. Why? At face value, it seems obvious. You need to set price guides for sales and weekly rents for leases. And you need to be able to talk knowledgably to consumers about what’s happening in your local market.

But what data are you using as your reference point and how are you interpreting it?

Understanding data

Dr Diaswati (Asti) Mardiasmo, Chief Economist at PRD, said that it’s not unusual for agents to face questions from sellers and buyers alike about why the price being quoted is different to, for example, what’s appearing online.

“This is when it’s essential to understand the source of the data and the story it’s seeking to tell,” she explained. “For example, a potential buyer might ask: ‘The price guide for this property is $925,000 to $975,000, but XYZ portal says the median house price for this suburb is only $850,000. Why the difference?’

“Yes, the overall median house price of the suburb may certainly be $850,000. However, a deep-dive into the data reveals a different story for this completely renovated three-bedroom, two-bathroom property, with a double lock-up garage and a balcony with water views. The data for comparable properties shows that the quoted price guide is accurate.

“This highlights why you need to not only be aware of general data that clients can readily access, but also know how to read and interpret the data from its source, so you can explain the nuances when questions come your way.

“This builds trust and can help you win business.”

Accessing raw data

Dr Mardiasmo said that having access to raw data is essential.

“When it comes to real estate data, we’re always presented with line graphs and bar charts that illustrate the ups and downs of the market, but what’s sitting behind these graphs and charts,” she asked. “This is where raw data comes in.

“A graph may put the median price at $550,000 for a particular regional area. But what is the data that makes up that figure? How many sales have there been? What’s the break-up of one, two and three-bedroom houses? Are they newer homes or older?

“You might find that by drilling down into the raw data, a newer, three-bedroom house is more likely to sell for $700,000.”

“And the same applies with the rental market. Looking at the raw data can help you to better understand median rents.”

The end goal, according to Dr Mardiasmo, is to use raw data so you can tell the most accurate and complete story.

“Analysing the raw data means you can better advise your clients and manage their expectations,” she said. “You can provide guidance and advice that is backed by a solid understanding of what the raw data is saying.

“And demonstrating your access and understanding of data will build trust, because not only do you have access to information and can show this information in its purest form, you also understand that information and can interpret it in a way that’s relevant to their particular circumstances.”

Telling the story

According to Dr Mardiasmo, having access to raw data means that agents can create stories that are useful and relevant.

“The median prices we see reported in the media and online are a snapshot in time,” she said. “By looking at the raw data, you can tell a bigger story. What was happening in the market a week ago, a month ago, three months ago, last year? What price movement has there been on a historical basis? For example, five to 10 years ago.

“And by looking at the data from a historical perspective, you can start to piece together the events that have impacted the market. For example, prices may have dropped at a certain point in time because of a flood or bushfire. Or prices may have increased because of the introduction of a new government grant.

“Importantly, you can see trends and can paint a holistic picture for your clients about the market – both in a current and historical context. This is important, as for many clients buying the home they’re going to live in or invest in tends to be a long-term proposition.”

When it comes to telling a story about what’s happening overall in your local market, Dr Mardiasmo said you need to bring different data sets together.

“It’s useful to think of different data sets as different parts of your body,” she said. “Think of it like this. The median price is your torso, the number of transactions is your right arm and capital growth is your left arm, and vacancy rates and weekly rent are each of your legs.

“Just as you need each body part to come together to form a complete person, so too do you need each data set to tell a complete story about the market.”

Dr Mardiasmo explained that it’s only when it all comes together – when you marry together different data sets – that you can truly advise your clients about the nuances of the market and arm them with the knowledge they need to make a truly informed decision.

“Yes, the median price may be extremely low in a particular suburb, but if capital growth is low and the vacancy rate is high, it may be better to buy in a suburb with a slightly higher median price, where capital growth is high and the rental market is tight,” she said. “It’s all about giving people all the information they need to make the best decision – and one that will give the most bang for their buck.”

Developing visuals

With the data now in hand and an understanding of what it’s saying about the market, Dr Mardiasmo said the next step is to communicate it in a way that promotes understanding.

“It’s all well and good to have great data, but it’s not worth too much if you’re not communicating the story it’s telling in a clear and understandable way,” she said. “No one wants to be presented with a huge spreadsheet of raw data, and there are lots of ways you can distil this data into a more digestible form.

“Line graphs, bar charts, tables, infographics – these are all useful tools. The key is to keep it simple and ensure these visual tools are telling the story you want them to tell. An infographic may look fabulous and on trend, be in your brand colours, and include some nifty bells and whistles – but if the user misinterprets the message, then it’s not doing its job. It’s not readable or usable, and, as a result, will lack credibility.

“So always ask someone else, preferably not in the real estate industry, to give you their interpretation of the visual tool that you’ve put together. Are they taking away the message that you want them to take away?”

Building trust

While data may seem daunting and scary, Dr Mardiasmo said it doesn’t have to be.

“As an agent, you need to drill down to data that relates to your local area,” she explained. “Importantly, you need to draw data from across a range of different data sets.

“Referencing the median price is not enough. You also need to look at data relating to the number of transactions, days on market, capital growth, rental yield, vacancy rate and upcoming developments in the area, so you can create a holistic narrative – past, present and future – around what’s happening in your local market.

“This makes the data more relevant and meaningful for your clients and, ultimately, builds trust.”