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Why Free property Reports are misleading investors

17 Jan 2019

They look professional and seemingly offer crucial information on the property market and they are also free, but does that mean they are actually worth the paper they are printed on?

Before throwing all your money at an investment on the advice of one of these reports, it’s important to examine where the report came from and who is behind putting it together.

Some questions to ask are: What is the data source used? Is the data complete? What about the facts and information that goes hand-in-hand with the data? Who is the research team? Is the report skewed in favour of a particular development or someone who has a vested interest? Do the reports meet your specific needs?

These are all essential questions to ask before making any investment decisions based on a report.

These reports usually include economic growth, employment, population growth, location and even that houses, with three bedrooms, a yard and carparking, have more appeal than units.

Many investors over-estimated the level of knowledge and information contained in free reports and were therefore unable to minimise their risk.

This was evidenced in Melbourne where a backward-looking view shows that at the end of 2017 the market delivered 8.9 per cent dwelling price growth and was enjoying outstanding population growth with projections looking favourable – at least if other factors weren’t considered.  

The picture is clearly very different now with the market delivering -7 per cent dwelling price growth in 2018. Our analysis forecasts the prospects for the Melbourne housing market are negative with price reductions in the order of 4-7 per cent for each of the years 2019 and 2020.

Also, often these free reports are lacking crucial information. A few of the very basic things an investor should look for, from a data perspective, are what is the risk associated with poor / negative capital growth for a property, how many properties are in the pipeline and what is the additional percentage to the current stock, and what is the estimated future projection of capital growth.

Some of these reports may be biased, presenting only the good attributes of properties and ignoring the major risk factors.

We recommend checking the credentials of the research team including their education, qualification and experience, and ensuring the report meets your specific strategy.

Investors need independent research so they can make informed decisions about what to do, but even more importantly, what not to do.

 *source Property Observer

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