Property sales volumes are more meaningful than median prices – Michael Matusik

Far too much commentary about the residential property these days focuses on price. 

Very little is actually said about sales.

When I first started in this game, sales volumes, and especially sales by price range or group, were far more important than median or average prices.

And for mine, nothing much has changed over the last 25 years in terms of what really matters when it comes to measuring a real estate market’s health – and that is, how many sales take place; in what direction are they heading & is there enough market depth i.e. sales volumes when it comes time for me to sell?

Recent data releases by both RPData (in their Quarterly Review) & by the REIQ (via their Queensland Market Monitor) provide some information about sales volumes.

But most of the conversation is about changing median values, which as I have discussed here & here, more often than not means very little at all.  It shows what sold rather than improvement or otherwise.

To the REIQ’s credit, they dedicate a lot more space to discussing sales volumes than most other recent reports.  I trust this remains the case as the QMM is about to undergo a facelift.  Here’s hoping that the content remains the same.

Importantly, a market’s position can be determined (in part) by sales volume trends.  A recovering market has, among other indicators, improving sales volumes.  A market in upswing has ‘fast’ sales; a downturn market has flat or slightly falling sales volumes & a market in decline/trough has declining sales.

Sales volumes are a great bellwether when it comes to future direction of prices & a market’s characteristics i.e. changing from a buyer’s market to a seller’s market for example.

 

So what is happening to sales volumes across the country & in the nation’s capitals?

According to RPData, there were 400,000 house & attached dwelling sales across Australia over the last 12 months.  Overall sales volumes have increased 2 per cent on the year before.

[sam id=37 codes=’true’]Yet sales volumes are 11 per cent lower than the five year average.

When it comes to new property sales, nationally, and according to the HIA, there were 64,000 new house & apartment sales over the last 12 months, which is 13 per cent down on the year before & a massive 28 per cent less than the five year average.

This is why – among other much needed legislative & tax-related changes to new housing – interest rates need to continue falling.

Interestingly, sales volumes (78,000 house & attached dwelling sales) are declining in the Sydney property market– says RPData – with volumes 9 per cent lower than the year before.  Volumes are down 12 per cent on the five year average.

The other capitals are as follows:

Melbourne: 72,000 sales; down 1 per cent on last year; down 16 per cent on last five year average.

Brisbane: 39,000 sales; up 10 per cent on last year; down 14 per cent on past five years.

Adelaide: 20,000 sales; little change on last year & also down 14 per cent on last five years.

Perth: 40,000 sales; up 26 per cent on last year; up 11 per cent on past five years.

Hobart: 3,700 sales; now 3 per cent down on last year; down 19 per cent on past five years.

Darwin: 3,000 sales; up 22 per cent on last year & up 2 per cent on past five years.

Canberra: 8,000 sales; down 6 per cent on last year; down 14 per cent on last five years.

 

This shows me several things:

Firstly, how small some markets actually are – Darwin, Hobart & Canberra spring immediately to mind.  The Sydney market, for example, is 26 times larger than Darwin.

Secondly, it would appear that Brisbane has entered a recovery.  It is a bit more ‘stop-start’ than many of us would like.

Adelaide seems to be stuck in a trough.

Perth & Darwin are well into their upswings; and despite some recent commentary to the contrary, Melbourne & Canberra appear to have peaked.

Thirdly, I don’t know what to make of Sydney’s sales decline.

Maybe RPData’s data is wrong?

Maybe not.

All other indicators suggest that Sydney is in a relatively strong recovery.

The theory is that declining sales volumes mean a slowing market, but life is often far more complex.

In this case, given the weight of other more positive evidence – such as rising clearance rates; fewer properties for sale; a drop in the time it takes to sell & declining private treaty discounting – I will bench Sydney’s sales results as an anomaly, until further evidence surfaces.

But, again, sales volumes are a good bellwether, so I will be watching the Sydney market a little more closely in coming months.

Having now somewhat shot myself in the foot, much more time & energy needs to be spent discussing actual sales volumes.  These are best discussed on an annualised basis & where possible, by product type.

All buyers should also want to know about how many sales actually take place around the price they paid for their property.  For example, if I bought a $425,000 apartment, I would want to know how many sales took place between $400,000 & $500,000 within the local area on average over the past couple of years.

I would also be interested if that market size had increased in recent years, so that I could estimate the resale market’s depth when it comes time to resell in the future.

Investors, especially, should pay little or no attention to median or average prices.

It’s sales volumes that are really important.

All investors need to start with the end in mind – an exit strategy if you will – and the important questions are, “Will someone buy this off me in the future?” and “How many buyers are there?”

This then provides insight as to the time needed to resell & at what price.

……………

This Matusik Missive, like all of them, is commentary & not advice.  Readers should seek their own professional advice on the subject being discussed.
Michael is the director of independent property advisory Matusik Property Insights and writes the  Matusik Missive which is free, however, reprinting, republication or distribution of any portion of this material, or inclusion on any website, is strictly prohibited without the written permission of Matusik Property Insights and may incur a charge.

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Michael Matusik

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Michael is director of independent property advisory Matusik Property Insights. He is independent, perceptive and to the point; has helped over 550 new residential developments come to fruition and writes his insightful Matusik Missive


'Property sales volumes are more meaningful than median prices – Michael Matusik' have 1 comment

  1. July 24, 2013 @ 10:24 pm Marco

    Hi Michael,

    Thanks for the post. It seems that the majority of people are quick to make a decision about the property market’s performance through merely looking at median prices. Many are overlooking the actual activity that is going on in the market, that is – the sales.

    If I could point out one observation within your post, the anchor text “REIQ” to the Real Estate Institute of Queensland’s website is broken. I believe you had the link directing to reiq.com.au. The actual address to this site is: http://www.reiq.com.

    Thanks again, and keep up the articles!

    Regards,
    Marco

    Reply


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