The devil’s in the detail for property data

The self-professed data geek said that by not relying on data, “you are at the mercy of your emotions, you’re making subjective decisions”.

From his perspective, it’s a great platform to work from because “it’s something that gives us a basis”.

Conceding that despite crediting data with so much, Mr Sheppard still makes emotional decisions and looks at things from a subjective perspective, he said “having at least a foundation to build on is going to save so many investors a lot of trouble”.

Drawing on his own experience, the researcher said he began looking at the data in the back of property magazines around 20 years ago.

He commented that he remembers querying, “Look, if this is all I knew – what would I pick?”

“Here’s the list of suburbs. They’ve got some metrics about five-year growth and one-year growth and vacancy rates and so on… What would I base my decision on?”

Mr Sheppard went on to say this practice got him thinking about each of those metrics and their relevance, and led him to consider “what is really going to drive property?”

“I guess I just realised that there’s a lot more data out there that I could acquire, and it would help me make a more informed decision.”

“And I can’t really remember that penny-dropping moment, but I do remember thinking [that] this is all about supply and demand,” he continued.

“That’s what drives the price of everything!”

Responding to a comment from host Phil Tarrant about the fact that demand and supply “is the holy grail for property investors”, the researcher quipped that “this goes beyond property”.

“It’s a fundamental law of economics,” Mr Sheppard stated, before noting it as something that’s not going to go away.

“Every commodity service – real estate’s no exception – is governed by supply and demand.”

“This is how we operate as humans,” he continued.

“And that means it’s a great basis to make your investment decisions on.”

But Mr Sheppard was quick to highlight “the devil, of course, is in the data”.

He noted that while auction clearance rates are a great indicator of demand, the problem with that sort of metric is that it is also quite short-term.

“The auction clearance rates of five years ago have no impact on property markets right now,” he said.

The researcher advised that “it’s current auction clearance rates that you want to look at”.

“And what about markets where they don’t have auctions?” he queried.

Conceding that there’s all these issues with the data, Mr Sheppard said you need a very broad range of metrics to look at.

It’s a case of managing all those pieces of information together into something “that gives you a good overall opinion of a property market”.