PROPERTY

Why the fall in property listings is a cause for concern

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Over the past 12 months, the words "property oversupply" have been bandied around a lot.

However, recent data from SQM Research shows that most markets actually have an undersupply problem.

According to the research, listings across the combined capital cities are down 4.2% over the past 12 months.

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Furthermore, CoreLogic found property listings across the country are down 2.1% over the 12 months to December 2016. In Sydney and Melbourne the story is even worse. Listings are down 9.4% and 2.9% respectively over that period.

It would seem that the costs associated with selling and buying put people off selling their home. As a result, buyers are left to battle it out over fewer properties, forcing up the prices across most of the capital cities.

In Sydney and Melbourne specifically, property values rose 15.5% and 13.7% respectively in the 12 months to January 2017.

Looking ahead, unless we see listings rise substantially prices will continue to increase.

Property prices are fundamentally driven by four key factors: supply versus demand; the cost of credit; access to credit; and the level of employment. At the moment, the unemployment rate is sitting at the  low level of 5.6%; interest rates remain at record lows; and Australia's lenders continue to be hungry for business.

On top of this, property demand remains strong, as evidenced by the fact that both Melbourne and Sydney have consistently enjoyed auction clearance rates above 75% for the past few months.

With all of this in mind, I wouldn't be surprised to see continued growth in property prices across some markets, specifically Sydney and Melbourne.

While the level of growth may not be as strong as we have seen in recent years, it is fair to assume that prices will continue to rise.

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