How to ease your way in
THERE are many different ways of looking at the market and making judgments about its performance.
You can look at sale prices, days on market or even turn up at auctions and count the number of active bidders.
These metrics will invariably tell you how the market is performing, whether it’s trending up, down, flat and by how much. However, metrics do not and cannot tell you about the future performance. They also don’t tell you about the ease of buying.
The fact is that some suburbs are easier to buy into than others because owners are less inclined to sell. This can be for many reasons; sometimes it is cyclic, for instance in the first few years after property is purchased the owners are less likely to sell.
We measure the ease of purchasing by comparing the number of homes advertised for sale in a given period with the number of properties in the suburbs.
These suburbs are often described as “tightly held”.
In the year ending November 30, 2014 across Melbourne, 5.3 per cent of all houses had been advertised for sale. Those houses sold over the same time had been owned for an average of 11.8 years.
Drilling down to a suburb level, the hardest place to buy a house was in Brunswick East.
In Brunswick East, a mere 2.1 per cent of houses had been advertised for sale in the past year. Those houses that did sell had been owned for well over the metropolitan average at 14.2 years and in a sign of the lengths buyers were willing to go, the median sale price rose 26.6 per cent in a year.
With some exceptions, there is a correlation between the period of ownership, the recent capital growth and likelihood to list for sale.
At a simple level it is demand and supply in action, which won’t surprise anybody currently active in the market. It also helps explain why real estate agents often letterbox suburbs or streets looking for an owner to sell. An analysis of the top 10 most difficult places to buy a house shows a high representation of suburbs in the inner north.
Carlton is second on the list and it is followed by Fairfield, Carlton North and Fitzroy North. In each case the proportion of houses on the market is below 3 per cent. With the exception of Carlton the increase in median sale price is above the metropolitan wide number for the same time.
The inner north of Melbourne has been in strong demand from buyers but the owners have not been as willing to sell.
The inner northern suburbs are not the only places this occurs in Melbourne. The top 10 is rounded out by Clayton South, Mulgrave, Watsonia, Hughesdale and Carnegie. With the exception of Watsonia, these are all in a similar part of Melbourne.
But what happens if you want to buy into a suburb where the owners don’t want to sell?
These are called “off market” transactions and they won’t be covered in this data because the homes are not listed for sale.
A small number of those will be the homes sold direct by the owners but the majority are those transacted with the assistance of a buyers’ agent.
Astute buyers’ agents are able to build their own seller networks.
This happens because sometimes an owner wants to sell without advertising or they find that because the buyers’ agent has a good network of buyers there is simply no need to buy the advertising to support the sale.
So if you want to buy into a tightly held suburb, it pays to approach local real estate agents and let them know you are interested and consider hiring a buyers’ agent.
Robert Larocca is CoreLogic RP Data’s Victoria housing market specialist
The median sale price in Brunswick East rose 26.6 per cent over the past year.