Analysis of House Prices and Factors in Melbourne Area

Table of Contents
Executive Summary.....................................................................................................................................2
Content........................................................................................................................................................3
Part 1 – Prices available in the city..........................................................................................................3
Part 2 – House prices significantly different with conditions and suburban............................................3
Part 3 – Relationship between the house prices and the factors which influences them..........................4
Part 4 – average rent and age of the property...........................................................................................5
Part 5 – Survey........................................................................................................................................6
Conclusion...................................................................................................................................................6
References...................................................................................................................................................7

Executive Summary
The basic purpose of this assignment is to analyse the data pertaining to the house prices and
associated factors in the Melbourne area. As per this assignment, Sandy is the manager of the
research team in the REIV, which is focused in analysing the various data which includes the
prices of the house, the rental revenues, returns expected from the investment etc. In a recent
project, the manager of the research team has undetaken a pilot survey in the Kingfisher bay, the
research team has began to collage various details pertaining to the prices of houses in the area,
rental costs, returns generated, the REIV is mainly interested in uderstanding the price
movements in the Kingfisher Bay, and the analysis is more focused in analysing the suburban
areas of the chosen city.
The main theme of this research is based on the memorandum received from the Director of
Housing Affordability Division in the real estate institute. The director is of the opinion that the
city of Kingfisher bay is one of the most expensive areas in the City of Melbourne and many
individuals finding it difficult to rent as the prices are high. However, the council of the bay feels
that such aspects are not true, so they have decided to investigate this aspects which intends to
focus on the prices of the houses and the rents which is charged across the suburban areas of the
chosen city. The director has posted five key questions which forms the basis of the research
report, they are involved in understanding the average prices of the house and whether the
median prices and the mean prices are the same, the director has also looking to test the
significant differences between the three key variables like conditions, suburban areas and prices
of the household in the Kingfisher bay, the thir question is mainly involved to test the
relationship between the prices of the house and the rental income, also to understand the key
indicators for the higher prices. The next part is to check whether the average retal prices of all
suburbs are more than $600 and the properties in the area are more than 10 years with a
proportion of at least 75%. Finally, the average prices are looking to check if the values are
nearly $50,000 and the vacant propertis in the area is within the range of nearly 3%. The
manager of the research team has collated the data pertaining to 120 houeholds in the locality
and all the analysis is made based on these data.

Content
Part 1 – Prices available in the city
The first part of the analysis is to understand the average prices of the houses in the Kingifsher
bay, based on the data which is collated from 120 households. The director has posted to the
researcher that the median prices are being stated in the newspaper, the director is of the opinion
that the mean price and the median prices are the same. But it should be noted that the average
price and the median price are different, the mean price is computed by suming up all the values
and dividing it by the total number of values, however the median price is the middle value, this
states that exactly half of the houses are stated as the price above and half the houses are stated
above these price. (Witte, 2010)
The median is considered as the set of values which is the half the numbers above and the half
the numbers are below the price, these values are stated to be more reliable as these values are in
the middle, whereas the average price is the values computed as the sum of all the numbers
dividing by total number of values, the average price is dependent on all the values which is
considered for the analysis. Based on the analysis it is identified that the average price of the
house is $868,580 whereas the median price is $852,000, so the prices which is stated in the
newspaper is of median values however the average price is marginally higher than the average
price. If the average values in the given area are higher than the media value, it states that the
area contains more significantly higher prices of the houses. It is observed that median is
considered as the intrinsically easy and understandable as these values are not affected by any
outliers.
Part 2 – House prices significantly different with conditions and suburban
Based on the overall analysis it is idenified that the 12.5% of the houses were in a very poor
condition, 33.33% of the houses were in a state of poor condition in the Kingfisher bay area,
however 35% of the households possess good conditions and the remaining 19.17% of the
houses were having excellent conditions. (Sarah, 2012)
The next step is to measure the significant differences between the suburb and the conditions of
the households. For this purpose, Z test is being conducted, this is used to measure the two
populations of the means when the variances are known. The researcher has made a null
assumption that there is no significant differences between the suburban and the conditions, It is