Danger of Data Driven Advocacy
Many buyers and even buyers advocates now lean heavily on data-driven models to inform their recommendations. While data has an important role to play, over-reliance on these models introduces several risks and limitations, especially in real estate, where context and nuance matter greatly. Here are the key dangers:
- Blind Spots in the Data
- Data can’t see behind walls: Models may not pick up poor floorplans, quality of renovations, construction issues, or intangible factors like natural light, street noise, or neighbour dynamics.
- Renovation quality: A model may treat all “renovated” properties equally, missing the difference between a cosmetic patch-up and a high-end, well-executed upgrade.
- Lack of Local Context
- Suburb vs. street-level detail: Data might favour a postcode or suburb, but not differentiate between the premium pockets and inferior locations.
- Nuances of demand: A particular school zone, café precinct, or distance from a train line can make a 10–20% difference in price and capital growth—something a model may overlook.
- Historical Bias
- Most models are backward-looking, relying on past growth and historical trends, which can mislead in changing markets or areas experiencing gentrification, rezoning, or infrastructure development.
- They can overvalue areas that have performed well but are now overcooked, or undervalue emerging areas.
- Overemphasis on Quantitative Metrics
- Growth %, yield, vacancy rates, etc., are important—but too much weight on these can push investors toward properties that "look good on paper" but are low quality or have limited long-term demand.
- High-yielding areas are often high-risk and low in capital growth; models may not highlight this adequately.
- Failure to Consider the Client’s Individual Goals
- A model doesn’t ask why the client is buying: Is it for family lifestyle, future upsize, retirement planning, or risk mitigation? Data doesn't capture personal context or financial strategy.
- Limited or Outdated Inputs
- Many models rely on public data that lags. In fast-moving markets, this can lead to outdated recommendations.
- Off-market activity, current buyer sentiment, and agent insight are often missing entirely.
- Risk of Herd Mentality
- When many buyers and advocates use similar data tools (CoreLogic, Suburbtrends, etc.), you get crowded strategies. Everyone chases the same metrics, inflating prices and reducing opportunities.
- False Sense of Precision
- A model might say Property A has a 5.4% projected growth vs. Property B’s 4.9%—but this falsely implies a level of accuracy that just doesn't exist in real-world property markets.
Conclusion:
Data is a powerful tool, but it should serve as a starting point and to assist with your due diligence, however it is not the whole story. The best outcomes come when data is combined with:
- On-the-ground knowledge,
- Human judgment,
- A tailored understanding of the client,
- And qualitative insights from local experience.