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How to Get a Quick Read of the Property Market

How to Read The Property Market

The growth of Sydney and Melbourne house prices over the last 12 to 18 months has been nothing short of astonishing. Surprisingly though, it’s not the first time these two markets have seen this sort of frenzied activity.

I have spent over two decades working in the residential property market. During that time I have been fortunate enough to experience a few different market cycles. Each one has taught me different things, for different reasons. Everything I have learned still resonates with me today.

I can still remember a time in the not too distant past (think global financial crisis) when the residential property market wasn’t anywhere near as strong as what it has been over the last 18 months. I know from history though, that what goes around comes around again in some way, shape or form.

So with decades and decades of history and past experiences from which we can draw on, why do so many people quickly forget or fail to reflect on the valuable lessons of the past?

The Value Of Lessons Learned

There is one constant with the property market. And that is that change is inevitable. If you want to be successful with property as an owner or investor, whether buying or selling, you absolutely must be able to read and react to the market.

I’m not talking about the crystal ball stuff here either. Make no mistake there are no magic crystal balls when it comes to real estate market predictions. Those that tell you otherwise, are quite simply making it up.

As far back as the 1930’s global depression era, all the way through to the 90’s recession we had to have here in Australia and more recently the global financial crisis, property markets have always risen, fallen, plateaued and inevitably bounced back again. Not necessarily in that order, but you get the drift.

Winston Churchill once famously said ‘Those that fail to learn from history are doomed to repeat it’. So with decades and decades of history and past experiences from which we can draw on, why do so many people quickly forget or fail to reflect on the valuable lessons of the past?

How to read the property market

To be perfectly honest there are a number of leading indicators that can provide great insight into the state of the residential property market. From my experience as a Sydney buyers agent, here are five of the most telling:

  1. Listing activity – This statistic relates to the volume of property available for sale at any one time. It is a very good check on supply and demand and whether a market is more favourable to buyers or sellers. When the volume of listings (supply) outweighs the pool of buyers seeking to purchase (demand) conditions are more favourable to buyers. When the opposite holds true conditions are more suited to sellers.
  2. Days on market – This statistic measures the time it takes to sell a property. Think of it as a thermometer that gauges the temperature of the property market. In a strong market this number will be low. In a hot market this number will be low and falling. You can tell the market is starting to cool when this number starts to rise.
  3. Vendor discounting – This is another valuable statistic. Vendor discounting measures how much a property sells for below its original asking price. The level of discount reflects how flexible or negotiable a vendor is when it comes to selling their property. In a strong market vendors generally don’t need to discount their asking price much, if at all. The opposite holds true in a weak market where more needs to be done by sellers to appeal to buyers.
  4. Auction clearance rates – This statistic is considered a leading indicator of property market sentiment. It represents the proportion of properties listed for sale by way of auction (over a given period) that actually sold at auction. A higher auction clearance rate is more prevalent in a sellers market. Conditions considered more favourable to buyers exist when lower auction clearance rates prevail.
  5. Consumer confidence – This statistic is not specific to the property market but is an overall indicator of the level of optimism that consumers have about the state of the economy and their own personal finance situation. In a nutshell, when consumer confidence is high people tend to spend more money as the economy is expanding. The opposite holds true when the number is low.

As indicated above there are many signals that can suggest different things about the state of the property market. No one in particular of any of the above five signs on their own would necessarily suggest that the property market is materially shifting one way or the other.

What I can say with a degree of confidence though, due largely to the wonderful benefit of hindsight and a little deja vu, is that when a combination of a few signs start to shift in a particular direction then mark my words we are moving into new territory.

Will you be ready and prepared to take advantage and make the most of the opportunities that emerge when the Sydney property market starts to cool? There is often no better time to buy. Be property savvy and Contact us today to speak to one of our buyers agents about your next property move.

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Shelley Horton is the founder of Sydney based exclusive buyers agency Albion Avenue. With a 20 year career honing her skills in every aspect of the property industry Shelley knows what makes a property worth buying and how to get the best deal.

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