A sign of things to come

Herald Sun - Property - - FRONT PAGE -

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

on Life­style.

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