The average time on market has recorded a sharp fall in April which is reflective of the stronger housing market conditions over the first quarter of the year.
But with property home values now falling can the current rapid pace of sale be maintained?
The time on market figure measures the average difference between the date at which a property is first listed for sale and the contract date. It is important to note that this metric is only measured across private treaty sales, i.e. it does not include auctions.
When the time on market figure is low it indicates that buyers and sellers are agreeing on a sale price relatively quickly and vice versa.
Across the country, the average time on market for all homes is currently recorded at 60 days and at the same time a year ago the figure sat at a slightly higher 67 days. The national average time on market for a house is 62 days currently compared to 68 days a year ago and for units it was 61 days a year ago compared to 51 days currently.
Looking at the recent figures you will note that the average time on market was abnormally high over the previous three months. A large part of this spike is seasonal, with the housing market in January and to a lesser extent February typically being interrupted by the fact that a larger proportion of buyers, sellers and facilitators (real estate agents, conveyancers, financiers etc) are on holidays.
The surge in selling time was much higher than normal over the early months of 2013, even taking the seasonality into account, and we didn’t see the average selling time fall by as much as normal in March.
It is difficult to decipher exactly what has happened, but this trend of longer selling time occurred in line with a sustained drop in total listings, so potentially some of that stock that had been sitting on the market for a long time started to shift.
Because the time on market figure is only calculated across those properties that sell over the month, a higher proportion of older stock selling will bias the results higher.
Across the combined capital cities, homes are currently taking an average of 50 days to sell compared to 60 days at the same time a year ago. Again you will note that over the previous three months the time on market was significantly higher however, the figure has now returned to similar levels as those in November 2012 (49 days).
Capital city houses are currently taking an average of 53 days to sell and units 44 days compared to 61 days and 56 days respectively a year ago. Like the national results, you will note that over the first three months of the year there was an unusually high average time on market.
The third chart highlights the relationship between the six month change in capital city home values and the average days on market for capital city homes. As the chart highlights, when values are rising, the number of days it takes to sell a home is inherently lower. On the other hand, when values are falling or growth is more moderate the time on market tends to be higher.
Of course this is a logical relationship but it is interesting to note that the change in direction of value movements actually tends to slightly precede the change in the number of days in market, which is indicative of the slight delay in the market catching up to the prevalent market conditions.
The fourth chart highlights the April reading for average time on market across each capital city for each of the past five years. Across most of the capital cities the current average time on market is lower than at the same time last year. In fact the time on market is lower across each capital city except for Brisbane and Hobart.
Sydney (35 days), Melbourne (38 days), Canberra (49 days) and Darwin and Perth (both 52 days) all have a comparatively lower average number of days on the market currently. On the other hand, Hobart currently has the longest average number of days on the market of all capital cities (110 days) followed by Brisbane (72 days) and Adelaide (68 days).
Although the average time on market is at quite low levels it will be interesting to see whether or not these levels can be maintained with lower levels of new stock coming on to the market at the moment and the recent successive monthly falls in capital city home values.
On the other hand, sales volumes have been improving from a very low base indicating that if vendors set appropriate prices on their homes, they should be able to attract buyers and sell the home in a relatively short period of time.