Home' API Magazine : December 2014 Contents 72 n APIMAGAZINE.COM.AU n DECEMBER 2014
HOUSING MARKET PERFORMANCE IS TYPICALLY MEASURED
by house price growth. The underlying level of price growth in
a particular housing market reflects the nature of the supply
and demand dynamics affecting that market.
Accurate and timely measures of housing market
performance are important to market stakeholders, including
homeowners, buyers, sellers, investors, governments, lenders
and a myriad associated entities and enterprises.
Timely and accurate insights into generalised house price
growth, however, remain problematic due to the nature of
housing and housing transactions. Homes remain highly
individual in their nature – location, quality, design and
size characteristics with individual buyer and seller tastes,
capacities, agendas and circumstances also generally unique.
Models of underlying price growth must account for these
unique characteristics and also the individual nature of local
market supply and demand drivers. Typically around six per
cent of all housing stock is sold in a year providing just a small
snapshot of potential market outcomes.
Despite this small sample size, house price models using
appropriate methodology can produce relatively accurate
insights into the underlying house price movements of capital
city markets over quarterly time periods. The problem with
quarterly house prices models, however, is that they are
inherently backward looking, reflecting market activity three
months in the past.
Weekend auction market activity on the other hand,
particularly in Sydney and Melbourne, provides useful insights
into underlying housing market activity and price growth.
Auction activity in Melbourne accounts for around 30 per
cent of all home sale transactions with Sydney recording a
lower, yet still significant, proportion of 20 per cent of all sales
by auction. Weekend auction clearance rates in Melbourne
and Sydney have consistently provided timely and accurate
insights into the underlying nature and performance of those
housing markets – particularly in relation to price growth.
The impact of the steep cut in official interest rates by the
Reserve Bank eventually released significant levels of pent-up
demand through the sharp improvement in affordability via
sharply lower mortgage rates.
As a consequence of increased buyer activity, price growth
emerged in most capital city markets through 2013 after
a period of relatively subdued market conditions in 2011
and 2012. The Sydney and Melbourne markets in particular
gathered significant momentum over the year with Sydney
recording decade-high levels of price growth and Melbourne
the highest growth since the boom-time conditions of 2009
and 2010. The acceleration of buyer activity and underlying
house price growth through 2013 was clearly signalled by the
performance of the weekend auction markets in both Sydney
Domain Group weekend auction clearance rates in Sydney
climbed from an average of 75 per cent over the first half of
2013 to an average 81.5 per cent over the second half of the
year. Sydney weekend clearance rates were also remarkably
consistent, with low volatility in the results recorded from
weekend to weekend reflecting the robust nature of the
clearance rate methodology and the stable underlying auction
market supply and demand dynamic.
Sydney recorded 19 weekend clearance rates above 80 per
cent over the 23 weekends from July 13, 2013 to December 14,
2013 with two at 79 per cent. The low mark of the series at
76.1 per cent was recorded on the final weekend of the season
when Sydney hosted its then-highest ever weekend of auctions.
Unsurprisingly, record auction activity in Sydney last spring
translated into near-record price growth with the Sydney
median increasing by 10 per cent over the second half of 2013,
the highest rate of growth recorded by the city since the boom
of 2002. Although the Melbourne market didn’t produce the
boom-time results of Sydney last year it nonetheless recorded
it best price growth since 2010 and unsurprisingly also its best
auction market performance since that period.
Melbourne weekend auction clearance rates rose from an
average of 67 per cent over the first half of 2013 to an average
of 73 per cent over the second half of the year. Similar to
Sydney, the weekend-to-weekend results were recorded in a
relatively narrow range, with the low volatility reflecting the
underlying robust nature of the methodology and the relative
stability of the auction market.
Rising clearance rates in Melbourne signalled rising prices
with the Melbourne median increasing by 6.8 per cent over
the final six months of 2013 – the best result for the city
since 2010. Although overall auction activity levels are lower
in other state capitals than Sydney and Melbourne, auction
market activity levels in those smaller markets also provide
reliable reflections of underlying market activity.
Stakeholders looking for reliable and timely insights into
general capital city housing market activity and associated
price growth therefore need look no further than the weekend
auction results. API
AUCTIONS SHINE LIGHT
ON PRICE GROWTH
n DR ANDREW WILSON is the Domain group senior economist. Follow him on
Twitter @DocAndrewWilson or listen to him on The Property Hour on Radio 2UE
on Saturdays from 2pm to 3pm.
“Typically around six per
cent of all housing stock
INVESTORS’ MARKET VIEW n Dr Andrew Wilson
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