MIS770 – Analytical Skills Foundations - Kingfisher Bay House and Rental Prices - Deakin Business School

Research and Analysis Assignment

Scenario You play the role of Sandy Stedwell who is the Manager of the Research and Analysis section at the Real Estate Institute of Victoria (REIV). Your role includes analysing a variety of housing data including house prices, affordability, investment returns, rental availability and rental returns. You are often required to report outcomes of your analysis to senior managers at the Institute who have little or no knowledge of data analysis. Of specific interest to the REIV are the increasing house prices in Melbourne and potentially what this will mean for buyers yet to enter the market. A recent analysis, which received publicity in the media, showed that there were more Melbourne suburbs with a median house price of over $1 million, with this trend only set to continue as evidenced from recent auction and private sales figures. Just recently, you have been working on a pilot survey from the City of Kingfisher Bay concerning house prices, rental costs and returns, as well as other related data. In light of the above, the REIV is very interested to see where the City of Kingfisher Bay, and more specifically its suburbs, is/are positioned when it comes to house prices and affordability. Hannah Zhou, the Director of the Housing Affordability Division at the Real Estate Institute, has written to you regarding the Kingfisher Bay housing survey. Her memo to you is reproduced below:

Memorandum

Date: 14th December 2017 To: Sandy Stedwell, Manager, Research and Analysis, Real Estate Institute From: Hannah Zhou, Director, Housing Affordability Division, Real Estate Institute Subject: Analysis of Kingfisher Bay’s housing and rental data Dear Sandy, There were some recent media articles regarding the lack of available rental properties across Melbourne causing a significant increase in both house and rental prices. The City of Kingfisher Bay was highlighted as one of the most expensive areas in Melbourne to purchase or rent. The Kingfisher Bay Council is concerned about the focus and believes the claims are untrue. They have commissioned us to investigate both the house prices and the rental prices across the different suburbs that make up Kingfisher Bay. From my initial meeting with the Kingfisher Bay Shire, five main questions were identified (see below). Can you please make use of the latest data we have collected on the Kingfisher Bay suburbs and provide a quick summary to each of the questions: Questions: 1. House prices in Kingfisher Bay (a) Provide an overall summary of house prices in Kingfisher Bay. (b) The media articles focus on median house prices and not the mean. I have never been able to understand why this is so; surely the “average” is the “average”. Can you provide a straightforward answer for me? (c) Provide an accurate estimate of the average house price for all houses in Kingfisher Bay. (d) Likewise, what is the estimation of the proportion of all houses in Kingfisher Bay that are $1million and more? 2. House prices vs. condition/suburb (a) If you can, please supply me with a brief summary on the condition of houses in Kingfisher Bay. (b) Does there appear to be any differences i. among the suburbs in terms of condition? ii. in house prices by condition in Kingfisher Bay? iii. in the house prices between the suburbs? (c) From your completed analyses so far, can you determine whether suburb or condition has a bigger impact on house prices? 3. House prices vs. factors influencing house prices (a) It is widely believed that higher house prices are being driven by those seeking good rental investments. Is there any basis to this belief? (b) What are the key indicators of higher house prices? 4. Concerns raised by real estate agents and developers I had a recent meeting with representatives from real estate companies and developers. During the meeting, these representatives made several claims that I am suspicious of and hence I would like you to investigate the claims listed below: (a) They stated that the weekly rent in Kingfisher Bay is at least $600, and hence rated as the most unaffordable area to live in Melbourne metropolitan and surrounding suburbs. Is that true for all suburbs in Kingfisher Bay? Can you check this claim for each of the three suburbs in Kingfisher Bay? (b) It was also mentioned that there was a lack of development across the Kingfisher Bay area as at least 75% of houses are 10 years or older. Can I disprove this claim and say that it is below 75%? 5. Future Surveys Finally, I am interested in your opinion about future surveys for the purpose of comparisons and tracking house prices and rental availability. In particular, I want to be able to estimate the average house price to within $50,000 and the true proportion of vacant houses in the market to within 3%. Are you able to advise me on the required sample size that satisfies those criteria?