A sign of things to come
AFTER the past few years of riding the property rollercoaster in many markets across Australia, people are always asking me for tips on where to buy. And what is happening next? There is one common phenomenon that indicates some potential growth is likely in the near future, possibly (I add that because there are no guarantees with residential property).
The interesting element of this ‘‘indicator’’ is it really can happen anywhere, at any time and even in a variety of market conditions.
This tends not to be just suburb-led, more an area, such as town, region or a group of suburbs.
By the way it is nothing new and not a secret, it just seems to get forgotten, especially in areas that may have experienced a very long-term downward trend. It is all about pent-up demand. This is best described as buyers not buying a product like they usually do at the same typical volume.
After a few years the buyers return to the market, not only in the normal number but you can add in those who have held back in the previous years.
Suddenly you have a back-tonormal demand, plus an added demand from this other buyer group. More demand generally equates to value gains.
In housing market terms this refers to a situation where sales volumes in an area or region have dipped considerably, usually for several years.
To explain, perhaps an area used to record around 400 house sales a year, sometimes 360, maybe one year 420; and that had been the case for four to five years, maybe more.
However, for whatever reason, those annual sales have dipped.
That dip in percentage terms in some places can be just 5 or 10 per cent but more often it is more extreme in volume drop-off, such as 25-50 per cent.
Admittedly the occasional area may lose sale volumes due to a local crisis such as a large employer moving out or an industry closing or scaling down.
However, those would be the areas where the volume figure is really hit hard.
If you come across such a location then it is usually only a matter of time until this will change.
After years of low sales volumes, values are down, sellers are reluctant to list etc, yet the fact that buyers each year haven’t bought doesn’t mean they don’t want to.
What it means is at some point, as the market generally recovers, this area will get a real kick as not only do the sales volumes and demand from buyers return, you can add in extra buyers who have been holding back in the quiet years.
Of course this makes no sense as buying in the quiet times is best, but buyers love good competition — and the assurances and comfort they are not the only ones wanting to buy.
So if you own a property in a quiet market, find out sales volumes annually from your agent or via a data source such as RP Data because this may give you a hint of when and if your area may get that little market lift.
Be warned: If you want to sell at that peak, it can be a short period of time, as other sellers discover the secret and add to the supply as buyer levels begin to balance out. Andrew Winter is the host of