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the one they’re moving to. But how we do measure this constant
movement, given there are no official stats to help us?
¿ DOES A RISE IN SALES POINT THE WAY TO A
There’s a neat way of estimating the movement of households as
it takes place by measuring changes in the number of housing
sales in an area over time. As households move into a city or
suburb they increase the number of house or unit sales that
take place. The growth in sales means that more buyers are
competing with each other and so we may have the ingredients
necessary to predict a potential rise in prices.
Therefore, by tracking changes in the number of sales in a city
over time, we should be able to predict where the next housing
market boom is about to occur, based on a rise in the number
of sales. Figure 3 shows the annual change in dwelling sales
that have occurred over the past year in each state capital city,
compared to the change in dwelling prices that took place over
the same time.
While Sydney’s shooting star experience saw the largest rise
in both dwelling sales and sale prices, the two cities with the
second and third highest price rises (Melbourne and Perth) had
the lowest rise in sales of all the capital cities and this shows
that there’s little to no correlation between increases in sales and
prices at all. Clearly, there’s something missing from the housing
market predictive puzzle.
¿ SUPPLY IS THE MISSING PIECE OF THE PUZZLE
When we add the role of supply in a housing market to the
puzzle, we suddenly see the whole picture. Supply can be either
new stock, such as house and land packages or off-the-plan
unit developments or it can be existing stock, which is put on
the market for sale. Together, they form the amount of housing
supply that’s available to prospective buyers.
It’s the ratio of supply to demand, or the number of intending
sellers compared to the number of prospective buyers that
determines whether prices will go up or not. This explains why
the increase in dwelling sales of 20 per cent and more in each
of Brisbane, Adelaide and Hobart only led to a minimal rise in
prices as Figure 3 shows.
Although the number of buyers in those cities rose
dramatically, there was enough housing stock already available
to absorb the increased demand without putting much pressure
on prices, while in Sydney there was already a shortage of
housing which meant that any growth in sales had a shooting
star effect on housing prices.
By trending the changing ratio of intending sellers to
prospective buyers we can start to make some meaningful
predictions for each capital city. Using the Property Power
Database we can derive the number of suburbs in each city that
will have housing shortages over the next year where prices
are likely to rise or keep rising, those that will be in balance and
prices will stabilise, and those that will have surpluses with a
tendency for prices to fall. Figure 4 shows the prediction for
each state’s capital city’s house market one year from now, as
revealed by this analysis.
This research doesn’t show us the likely rate of growth in
each suburb with forecast stock shortages, nor the potential rate
of decline in those with predicted surpluses. It does indicate
that cities with a majority of suburbs having shortages will
experience overall price growth and the median price growth
is likely to be higher for Melbourne than the other capital cities,
while Canberra, as the only city with a majority of suburbs in
surplus is unlikely to enjoy overall price growth.
The pie charts in Figure 4 show us that investors in Canberra
will need to look carefully to find those suburbs where growth
is probable. On the other hand, the only city with over three
quarters of its suburbs likely to experience stock shortages will
be Melbourne, but is this the making of a shooting star? To find
out, we must discover which types of buyers will be most active
in the coming years.
¿ WHAT TYPES OF BUYERS WILL BE MOST ACTIVE IN
We can group the housing market by types of dwelling such
æBy tracking changes in the number of sales in a city over time, we
should be able to predict where the next housing market boom is
about to occur.Æ
FIGURE 3: ANNUAL CHANGES IN SALES AND PRICES
Change in dwelling sales
Change in dwelling prices
FIGURE 4: CAPITAL CITY’S HOUSES PREDICTION
Suburbs with surplus
Suburbs with shortage
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