OPINION: FAR too much commentary about the residential property these days focuses on price. Very little is actually said about sales. When I first started in this game, sales volumes, and especially sales by price range or group, were far more important than median or average prices.
And for mine, nothing much has changed over the last 25 years in terms of what really matters when it comes to measuring a real estate market’s health – and that is, how many sales take place; in what direction are they heading & is there enough market depth i.e. sales volumes when it comes time for me to sell?
Recent data releases by both RPData (in their Quarterly Review) & by the REIQ (via their Queensland Market Monitor) provide some information about sales volumes. But most of the conversation is about changing median values, which as I have discussed here & here, more often than not means very little at all. It shows what sold rather than improvement or otherwise.
To the REIQ’s credit, they dedicate a lot more space to discussing sales volumes than most other recent reports. I trust this remains the case as the QMM is about to undergo a facelift. Here’s hoping that the content remains the same.
Importantly, a market’s position can be determined (in part) by sales volume trends. A recovering market has, among other indicators, improving sales volumes. A market in upswing has ‘fast’ sales; a downturn market has flat or slightly falling sales volumes & a market in decline/trough has declining sales.
Sales volumes are a great bellwether when it comes to future direction of prices & a market’s characteristics i.e. changing from a buyer’s market to a seller’s market for example.
So what is happening to sales volumes across the country & in the nation’s capitals?
According to RPData, there were 400,000 house & attached dwelling sales across Australia over the last 12 months. Overall sales volumes have increased 2% on the year before. Yet sales volumes are 11% lower than the five year average.
When it comes to new property sales, nationally, and according to the HIA, there were 64,000 new house & apartment sales over the last 12 months, which is 13% down on the year before & a massive 28% less than the five year average. This is why – among other much needed legislative & tax-related changes to new housing – interest rates need to continue falling.
Interestingly, sales volumes (78,000 house & attached dwelling sales) are declining in Sydney – says RPData – with volumes 9% lower than the year before. Volumes are down 12% on the five year average.
The other capitals are as follows:
Melbourne: 72,000 sales; down 1% on last year; down 16% on last five year average.
Brisbane: 39,000 sales; up 10% on last year; down 14% on past five years.
Adelaide: 20,000 sales; little change on last year & also down 14% on last five years.
Perth: 40,000 sales; up 26% on last year; up 11% on past five years.
Hobart: 3,700 sales; now 3% down on last year; down 19% on past five years.
Darwin: 3,000 sales; up 22% on last year & up 2% on past five years.
Canberra: 8,000 sales; down 6% on last year; down 14% on last five years.
This shows me several things:
Firstly, how small some markets actually are – Darwin, Hobart & Canberra spring immediately to mind. The Sydney market, for example, is 26 times larger than Darwin.
Secondly, it would appear that Brisbane has entered a recovery. It is a bit more ‘stop-start’ than many of us would like.
Adelaide seems to be stuck in a trough. Perth & Darwin are well into their upswings; and despite some recent commentary to the contrary, Melbourne & Canberra appear to have peaked.
Thirdly, I don’t know what to make of Sydney’s sales decline. Maybe RPData’s data is wrong? Maybe not. All other indicators suggest that Sydney is in a relatively strong recovery. The theory is that declining sales volumes mean a slowing market, but life is often far more complex.
In this case, given the weight of other more positive evidence – such as rising clearance rates; fewer properties for sale; a drop in the time it takes to sell & declining private treaty discounting – I will bench Sydney’s sales results as an anomaly, until further evidence surfaces. But, again, sales volumes are a good bellwether, so I will be watching the Sydney market a little more closely in coming months.
Having now somewhat shot myself in the foot, much more time & energy needs to be spent discussing actual sales volumes. These are best discussed on an annualised basis & where possible, by product type.
All buyers should also want to know about how many sales actually take place around the price they paid for their property. For example, if I bought a $425,000 apartment, I would want to know how many sales took place between $400,000 & $500,000 within the local area on average over the past couple of years.
I would also be interested if that market size had increased in recent years, so that I could estimate the resale market’s depth when it comes time to resell in the future.
Investors, especially, should pay little or no attention to median or average prices. It’s sales volumes that are really important. All investors need to start with the end in mind – an exit strategy if you will – and the important questions are, “Will someone buy this off me in the future?” and “How many buyers are there?” This then provides insight as to the time needed to resell & at what price.
Next week, we will outline what is taking place – sales volume-wise – across Queensland. Stay tuned.
Michael Matusik.* Michael is the founder of Matusik Property Insights.
Property Reviewer on Property Review
