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January 23, 2024

The Real Estate Metrics Everyone Needs To understand

If you’re considering investing in property in 2024, you’ll want to get your head around some key terms and metrics.

We explore the most important ones to consider if you plan to buy into Toowoomba’s property market this year.

Median sales price

As we enter 2024, the median sales price in Toowoomba is $562,229 according to CoreLogic. Meanwhile, the median rent is $496 per week.

But what exactly does this mean? Many people confuse median price with the average price, but there is often a big difference.

The average price is the total value of sales in an area or suburb divided by the number of sales. However, the median price is the value of the “middle” sale, or 50th percentile, when the sales are arranged from lowest to highest.

The median is a more representative metric when it comes to the true state of the market because an average can be distorted by an outlying sale.

For instance, if three different properties sell for $550,000, $650,000 and $1.3 million, the average would be $833,333.33 – which would be much higher than most people have paid for their home – but the median would be $650,000.

Several data agencies collect median price data but they tend to calculate it differently.

CoreLogic uses a ‘hedonic’ method for its Monthly Home Values Index, which overlays sales data with property characteristics (i.e. number of bedrooms and bathrooms, etc) and ‘geographical context’. This gives a more nuanced and detailed picture of the state of the market than our previous example.

Capital growth

You often hear investors talking about capital growth, which sounds complicated. But really, it just refers to the increase in something’s value.

It’s usually expressed as a percentage. So, if a property originally purchased for $500,000 grows in value over a year to $550,000, the capital growth would be $50,000 or 10%.

Toowoomba’s median house value rose 7.9% to reach $562,229 in the year to October 2023, according to Corelogic data. Meanwhile, PropTrack shows home prices in the Toowoomba region have increased by 52% over the past five years.

PropTrack also forecasts that, based on its capital growth projections, the median house price in some Toowoomba suburbs will hit over a million dollars in the next five years, including East Toowoomba, Highfields, Middle Ridge and Kleinton.

Days on market

Days on market is the number of days a property takes to sell or to lease. A lower number indicates a more competitive market, while high days on market suggests there are more homes for sale than buyers.

Recently, Toowoomba has had record low days on market for sales. In fact for a couple of years, Toowoomba held the national record for the fastest selling market in the country for any regional area.

As of October 2023, Toowoomba properties spent an average of 23 days on market.

Toowoomba is also experiencing a super tight rental market, with apartments in East Toowoomba spending just 15 days on market, while in North Toowoomba it’s just 13 days.

Negative (or positive) gearing

Negative gearing is an often discussed but little understood feature of property investing. It refers to when the income you receive from an investment property is lower than your expenses, including any mortgage interest repayments you need to make.

Positive gearing, on the other hand, happens when the income you earn from your investment totals more than the cost of your loan repayments, interest and any other property-related expenses.

Thanks to generous tax breaks, many investors negatively gear their properties when they first buy. Ideally, a negatively geared property should end up positively geared over time as capital growth occurs and you pay down the mortgage.

There are pros and cons to both positive and negative gearing, so it pays to consult a financial advisor for advice on what best fits your situation.

Yield

If you’re planning on renting out your property, yield is the income generated, usually in the form of rent, and is expressed as a percentage of the property’s value.

For example, if a property is worth $500,000 and it generates $25,000 in income a year, the gross yield would be 5%. The net yield would be the income received after expenses, such as strata and property management fees, are subtracted.

As we enter 2024, yields for Toowoomba houses are very good, with the median gross yield sitting at over 4% for houses and over 5% for apartments, according to SQM Research.

Read our article on yield vs capital growth here.

Vacancy rate

The vacancy rate is a measure of how many rental properties in a given location or market are currently not leased.

It is calculated by dividing the number of rental properties in the area by the number of those properties that are vacant and then recording the result as a percentage. For example, if there were 1,000 properties and 25 of them were vacant, the vacancy rate would be 2.5%.

The current vacancy rate in Toowoomba is low, at just 0.7% at the end of 2023 according to SQM Research, while CoreLogic (which uses different methods to calculate the figure) puts it at 1.2%.

Read more about vacancy rates here.

Depreciation

Negative gearing isn’t the only tax benefit that comes from property investing.

Many investors also have the opportunity to deduct any depreciation in value of fixed items in the property and, sometimes, even the property itself. Property investors who want to claim depreciation need a depreciation schedule.

A depreciation schedule itemises everything in a property on which you’re claiming either capital works or plant and equipment depreciation. It also includes the rates at which you’re claiming depreciation and how much you can claim over each financial year.

Read more about depreciation schedules here.

Want more?

If you’re interested in investing in property in Toowoomba and its surrounds, get in touch.

Interested in selling in 2024? You can receive a property estimate on our website. However, if you want to know its current market value, you can also ask us to provide a free market appraisal.

Article by James O'Donohue

Delivering a premium service experience has been Team Elevate’s primary focus since commencing their real estate journey. James and Shaun created a team to ensure that they maintained a premium standard for Sel… View profile

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