Neighbour Price Balancing (NPB®)
What is the NPB?
NPB stands for Neighbour Price Balancing. The NPB is the percentage price difference per kilometre between a property market and its neighbours.
For example, if the typical value of houses neighbouring a suburb are $500,000 but the suburb itself has prices closer to $400,000 then there is potential for some of that $100,000 price differential to balance out. If the neighbours are on average 2.5 km away, then there is a $40,000 per kilometre NPB potential.
If there is a large price difference between neighbours and the market, then it is possible a balancing of prices is about to occur. If prices in neighbouring markets are more expensive, then there could be pressure on prices of the target market in the middle to catch up and restore balance.
A weighted average is used to combine neighbour prices. The closer a neighbouring market is, the more influence its price will have on the calculation.
Why is the NPB important?
The NPB can add weight to the potential a property market has to experience strong growth. It is just another statistic that investors should consider.
Analysing a property market from every angle and seeing positive signs from all of them will give the investor more confidence about the nature of the market.
The NPB is one of the statistics incorporated into the
the DSR+.