Understanding housing market microtrends
If you are confused by some of the messages being published on the housing market and where it is going, you are not alone.
Every day there seems to be a different article with a different slant, from good growth and high clearance rates on good auction volumes, to disaster and "property bubble" speculation.
The truth, as always, is somewhere in the middle but, more importantly, varies by geography and property type.
The Australian housing market is not a single entity.
It is rather a collection of "1000 markets", all with their own characteristics of supply and demand.
Mining towns, where the dominant employer has downsized its workforce, are very different from inner-city suburbs with the complex economy of a modern city.
So how do you keep track of the market and know where to look to find accurate information?
First, choose a market or a few markets to really get to know.
Define your market as a collection of suburbs or postcodes with similar characteristics, such as the northern beaches in Sydney or the inner west.
Then focus on market metrics and, importantly, their trend over time.
Characteristics such as the median time on market, the auction clearance rate, the median rental yield and the level of discounting from first list price to ultimate sale price all are good leading indicators of future price movements.
Once you have an idea of how the market has performed in the past and what its current forward indicators mean, focus on the supply-and-demand characteristics and the demographic make-up.
Spend time researching who lives in the area, the split of investors and owner-occupiers, and where they work.
Look at housing type changes from houses to units (infill), the level of new development approvals for units and average land size, and how these change over time.
This will give you a very good idea of what is happening in both supply (housing and unit completions) and demand (buyers and their demographics) and therefore put you in a good position to make decisions on when and what to buy.
A few other pointers:
- Look at quality of construction and build. At CoreLogic we see distinct advantages in long-term returns for well-built and well-positioned properties.
- If you can, look particularly at properties where supply is limited and will naturally stay so, for example a unique view or position relative to transport, open space or water.
You can take the risk away from property investment through good data and good research, which together can provide the deep insights into where to buy, when to buy and what to buy.
Good luck in your property journey.