Residential Sales Reflect the True State of the Housing Market

November 17th, 2014

Curtis Associates Oct 1

Sales volumes and not the reported price growth is the key to knowing where the property market is headed and to buying/selling property, according to Michael Matusik, founder of Matusik Property Insights.

The media always talks about house prices to assess the current state of the housing market and to predict possible outcomes. However, basing it on price alone is not a good indicator of how well or how bad the market is doing, said Matusik in a recent article. The movement in prices has mostly got to do with sales volumes, not changes in prices.

According to three graphics depicting residential sales both across Australia and Queensland, Matusik made the following observations:

  • In the whole of Australia, up to 470,000 residential sales take place each year, with sales being 14% higher than the previous year.
  • The sales by state are as follows
    • NSW – 152,250
    • VIC – 109,250
    • QLD – 100,000
    • WA – 53,250
    • SA – 33,500
    • TAS – 9,500
    • ACT – 7,500
    • NT – 4,000
  • It’s best for investors to buy in areas that have large and steady sales volumes, for example in an area that already has an established resale market.
  • Most sales in QLD occur in the southeast, for example, Brisbane had 25,700 sales, Brisbane surrounds had 19,450 sales, the Gold Coast had 15,650 sales and the Sunshine Coast had 9,400 sales.
  • A rise in sales suggests a recovery, whereas a fall in sales indicates a market peak or downturn.

Furthermore, Matusik said that investors should also consider the following factors before buying a property:

  • The number of sales that take place every year within a 10-minute commute.
  • The number of sales valued within $50,000 of the asking price in the local area.
  • Whether sales are increasing or falling – A rise in sales means increasing demand, so investors should make a reasonable offer. On the other hand, a decline in sales means falling demand, so investors should either delay an offer or make a hard offer.
  • Who’s buying property in their chosen area, as well as the number of investors and where they’re from – It’s important to know the potential size of one’s resale market. The bigger the market, the easier and quicker it’ll be to sell. Also, areas where there are a lot of investors buying properties – especially when they’re not local – tend to come along with poor property performance.
  • The number of similar properties in the area being purchased by owner-residents on resale – Areas and projects with increasing owner-resident demand often come with better growth in prices and returns on rent.

For property owners and investors, when it comes to buying/selling property what’s important is not the price, Matusik pointed out, but whether there will be buyers at resale. And if there will be buyers, how long it’ll take to sell at or above their asking price.

The media should also start talking more about sales volumes instead of just prices in order to give a more full and accurate picture of how the property market is faring, in Matusik’s opinion.