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Understanding Real Estate Jargon
Friday, May 02, 2008
News reporting on the property market has developed a bit like reporting on financial markets, with an increasing use of jargon. However, most of it is fairly simply to follow once you take a moment to think about it, so this column is designed to help demystify some of the more common terms.
MEDIAN PRICE:
The mid point for a range of property values that are ranked from the lowest to highest in price. For example, if there are five sales in a sample ranked from cheapest to most expensive, the median is sale number three. REIWA uses the median price as a better way to gauge a market, rather than using the average price which can be easily skewed by a larger number of high or low sale prices.
VACANCY RATE:
The proportion of rental properties that are unoccupied. A high vacancy rate is better for tenants, giving them more choice. A low vacancy rate means things are tight and generally puts upward pressure on rents. The vacancy rate can be used to indicate if the overall supply of housing is meeting demand.
CAPITAL GROWTH:
The increase in the value of a property. The capital gain is the difference between the purchase price and the selling price. It is used primarily for income tax calculations.
INVESTMENT RETURN:
The combination of capital growth and the net income derived from property ownership.
GROSS RENTAL YIELD:
An equation used to compare rental returns. Its calculated by dividing the annual rental return by the price of the property and then multiplying that result by 100. This can help you compare the rental yields from different properties with different values and rental returns. The rental yield tends to go down as the price of the properties rise. Investors are generally looking for higher gross rental yields.
TITLE:
The ownership of a property, or document showing evidence of ownership. In WA the most common form in the residential market is known as Green Title. This is usually a traditional bock of land not affected by owners of adjoining properties.
STRATA TITLE:
This is different to Green Title because it covers land that is shared by owners of adjoining strata titles. Shared land is known as common property. Strata title dwellings in Perth are more commonly places such as villas, units and townhouses which have a common driveway.
R-CODES:
The name for the residential housing density codes, describing the average land area required for construction of a dwelling on a block of land. R-Codes are referred to by developers when considering redevelopments. To calculate the land areas which apply to each R-Code simply divide 10,000 by the R-Code. For example, the common R-20 zoning in Perth would require 500sqm of land for each dwelling.
- REIWA