Good news for property investors – leading indicators are pointing to an improving market

In good news for those interested in property investment, 2012 finished off with the lead indicators are supporting improving property market conditions.

The average time on market and level of discounting by vendors are important metrics for the overall performance of the housing market and both have been on an improving trend over recent months.

The average number of days on market figure measures the length of time those properties which sold over any given month had been listed for sale. Over recent months, the average time on market has been declining, indicating that homes are selling quicker.

As at October 2012, homes across the combined capital cities were taking an average of 49 days to sell with houses taking 51 days and units taking 46 days. In October 2011, capital city homes were typically taking 58 days to sell with houses taking 60 days and units taking 51 days. The data shows a clear shift towards a more rapid selling time this year.

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Across individual capital city housing markets, the average number of days on market has generally fallen over the past year. In fact, Hobart and Canberra are the only two cities in which the length of time on market has increased.

Hobart has been the weakest performing capital city housing market over the past year while Canberra has seen no change in home values over the year.

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The shorter period of time over which homes are taking to sell across capital cities is reflective of improving housing market conditions over the year. Based on the RP Data-Rismark Home Value Index results for November 2012, combined capital city home values have fallen by -0.1% over the past year compared to a fall of -4.8% over the 12 months to November 2011.

Vendor Discounting

Another key indicator of market performance is the vendor discounting measure.

Vendor discounting is simply the difference between the price at which a home was originally listed compared to the price at which it ultimately sells.

This indicator provides insight into how accurately vendors are selling their price to meet market conditions and their preparedness to negotiate in order to sell.

As at October 2012, the level of vendor discounting was recorded at -6.6% for capital city homes with houses recorded at -6.8% and units at -5.9%. In October 2011, vendor discounting was recorded at -7.3% across the combined capital cities with houses at -7.4% and units at -6.8%.

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Across the individual capital city markets, discounting levels have weakened for houses in Sydney, Melbourne, Hobart and Canberra but improved elsewhere. Across the unit market, discounting levels have improved across each city except for Adelaide and Hobart.

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The improvement in discount levels most likely indicates vendors are setting more appropriate initial list prices.

This fact, coupled with the faster selling time indicates they are discounting more rapidly than they were a year ago in order to achieve a sale.

Overall the data lends further weight to the improving housing market conditions that have been prevalent since May of this year.

Over the coming months, we would expect that these indicators will increase through the seasonally slower Christmas and new year period. Thereafter it will be important to note whether they improve further, potentially signalling a further recovery in the market or if they deteriorate which would suggest the recent market recovery may be running out of steam.

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Want more of this type of information?


Tim Lawless

About

Tim heads up the Core Logic RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia. Visit www.corelogic.com.au


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