Introduction

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Introduction

  • When people buy a house there are a number of factors that they are generally wanting in return for their purchase price, including:

    • The building itself, and the utility it provides (e.g. bedrooms, bathrooms, living area)
    • Speculation of potential future increase in the land or building’s value
    • Perceived prestige or status of living in a certain area
    • The lifestyle that the location of the home will enable (utility from the surrounding geography, and the surrounding location’s relative socio-economic advantage)

  • While the most important lifestyle factors may vary from person to person, measures of an area’s relative social advantage and disadvantage are quantified by the government and published in the Index of Relative Socio-economic Advantage and Disadvantage (IRSAD), which looks at how indicators of disadvantage and advantage are spread across Australian localities

  • With the state-wide median house value consistently increasing from year to year, it’s worth investigating whether non-home-owners are being priced out of advantaged areas, and what the relationship is between median suburb house prices and the measure of relative socio-economic advantage or disadvantage for that region

  • This investigation will look into what this relationship looks like, and whether it illustrates anything pertinent to the decision-making process for prospective home owners

 

* Please click the Data & References link in the toolbar above for an introduction to the data that will be examined, then click the Storyboard link to begin the storyboard

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Data & References

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Definitions and Data Sources

Two primary data sources and two supplementary sources were used for this analysis. Each are described briefly below, and please see the comprehensive reference for each source to the right.

Primary Sources:

  • Index of Relative Socio-economic Advantage and Disadvantage (ABS, 2018a)
    • The IRSAD index for all postal areas, derived from the 2016 Australian census. A higher score indicates higher relative advantage and less relative disadvantage, and a lower score represents the inverse. The index is standardised around a mean of 1000, with a standard deviation of 100.
  • Victorian Median House Prices by Suburb, Q3 2020 (DELWP, 2020)
    • The most recent open house pricing data by Victorian locality at the reporting date. Only house prices are within scope, with apartment/unit data published separately. Some suburbs may not be included where there is insufficient sales data for the period.

Supplementary Data:

  • Australian Postcodes (Geonames, 2020)
    • The GeoNames open data set of Australian postcodes was used to join the house price and IRSAD data, as the official Australia Post dataset is not released as open data
  • Local Government Areas ASGS Ed 2016 Digital Boundaries (ABS, 2018b)
    • This ABS shapefile data was used to create the choropleth maps that appear in the storyboard

Please click the Storyboard link in the toolbar above to begin the storyboard. Slides in the storyboard can be navigated with the arrow icons, through clicking on the navigation boxes, or by using the arrow keys on your keyboard.

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References

Storyboard

Raw Prices & Relative Advantage (1/6)

Interactivity note: further details can be seen by hovering over the data points in the plot

  • This first plot shows the raw relationship between each suburb’s IRSAD value and their median house price

  • It appears as a largely linear relationship, with diminishing returns as the median price increase beyond $1m

  • There is a lot of overplotting in the <$1m range, as the majority of data points fall within this range. This is largely due to the axis compression of the high median values in some locations (such as Toorak’s outlier value at the far-right of the plot)

  • The following plot will adjust this view by showing the calculated percentile of each suburb’s median price, rather than the raw values, which will help reduce the overplotting

Price Percentiles & Relative Advantage (2/6)

Interactivity note: further details can be seen by hovering over the data points in the plot

  • While there appears to be a positive relationship between the median house prices and the relative advantage of these areas, it’s clear from this plot that the data set is not perfectly correlated, and a higher price does not definitively result in the area having a higher IRSAD score — there are many suburbs that don’t fit along the expected line, with both unexpectedly high and low values present

  • To illustrate this spread, the following plot will add a colour scale:

    • Each suburb’s IRSAD rating will be converted to a state-wide percentile, and a difference value will be calculated by subtracting the price percentile from the IRSAD percentile
    • A higher difference value indicates more relative advantage for the price, whereas a lower difference value indicates that an area’s advantage is less than what would have been expected (based on an expected linear positive relationship between price and relative advantage)

Where do you get more/less advantage than expected for the price? (3/6)

Interactivity note: further details can be seen by hovering over the data points in the plot

  • The addition of the colour axis indicates that there are pockets across Victoria with disproportionate relative advantage/disadvantage for the price, and illustrates that the same relative advantage/disadvantage may be shared by suburbs at various differing price points

  • To highlight this, we will look at a small subset of regions on the next slide

Subset (4/6)

Interactivity note: further details can be seen by hovering over the data points in the plot

  • This plot represents all suburbs that roughly fall at one standard deviation lower than the mean relative advantage/disadvantage (suburbs with an IRSAD score of 895-905)

  • While the IRSAD scores of these suburbs only differ marginally from each other, the price point varies greatly, from Casterton on the far left to Albion on the far right representing a range from $117,500-755,000

  • A logical question that may be asked is whether the variance illustrated by this plot and the preceding slide is related to geographic proximity, and this will be examined on the following slide through spatial analysis

Spatial Analysis (5/6)

Please note: plots on this slide are static due to file size and hosting limitations

  • While there are some regions with a number of similarly-categorised differences (e.g. the band of low percentile-differences observed in suburbs south east of Melbourne along the Mornington Peninsula), there is no apparent trend of which areas will provide more or less relative social advantage for the price

  • This wide geographical diversity indicates that when it comes to relative social advantage or disadvantage, there will likely be suburbs that provide disproportionately higher or lower value compared to their neighbours, regardless of whether a prospective buyer is looking for a home in inner-Melbourne, the metropolitan outskirts, or regional areas across Victoria

Conclusion (6/6)

Conclusion

  • The examination of the data has indicated that an area’s median house price is not a reliable indicator for the relative socio-economic advantage provided by that area, and that a group of suburbs with similar relative advantage/disadvantage may have vastly different pricing norms.

  • Prospective purchasers for a region should not infer benefits or advantages based on a premium pricing alone, and should examine shortlisted locations objectively to inform the lifestyle changes they will become able to access through that purchase, and weigh up the lifestyle impact with the pricing trade-off.

  • Like all emotive purchasing decisions, the decision to buy a home will never be a perfectly rational process for the vast majority of people, and this data alone will be insufficient to inform such a decision. While the relative advantage/disadvantage present in an area is only one factor for prospective buyers to consider, this analysis suggests that it’s certainly worth investigation.

  • If purchasers are hoping to establish a lifestyle with relatively higher advantage, and are flexible with their specific location, they may be able to establish the lifestyle they desire at a far lower cost than expected.

   

Authorship

  • This analysis was undertaken by Lewis Shobbrook (s3870266) as the final assignment for the RMIT Data Visualisation and Communication course (MATH2270), Semester One 2021

  • Thank you for reading! If you have any feedback or questions, please feel free to contact me through

Appendix - Where is the Most Advantage for the Price?