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Rise in the months of housing supply

As the Spring selling season progresses we are seeing a rise in the number of newly listed properties being added to the market, however, we aren’t seeing a commensurate lift in transactions resulting in a rise in the months of housing supply.

The months of supply calculation is simply a function of the trend number of property sales and the amount of properties listed for sale.

For example, if there were 100 homes for sale and we typically see twenty sales each month, there would be five months of supply in the market.

Or, in other words, it would take five months to absorb all the stock available for sale.group crowd house invest portfolio property paper

Although there is a lag in receiving sales, other data such as valuation activity, clearance rates and mortgage commitments, point to a minimal increase in transaction activity so far this Spring.

As a result we are starting to see the months of housing supply trending higher.

Across the combined capital cities, there is currently 3.4 months of supply on the market.

This figure has increased from a recent low of 2.9 months in March.

You will note on the first chart that the months of supply figure spikes each Christmas/New Year period.

This is due to the fact that sales volumes fall sharply at that time of the year while there is also a moderate fall in total listings.

As the number of newly advertised listings continues to grow we anticipate that the months of supply figure is likely to trend higher.

Although the months of supply is rising, it remains low on an historic basis.

This is of course reflected by a fairly rapid rate of sale however, much like headline value growth figures this is largely being fuelled by the very strong conditions across the Sydney and Melbourne housing markets.

Months of supply for houses and units, combined capital cities

2015-10-26--months-supply-img1
The second chart highlights the current months of supply figure across each capital city and the figure over the corresponding week for each of the past 8 years.

As always the trends vary significantly across the individual capital cities highlighting the differences in market performances and the balance between buyer demand and advertised supply.

2015-10-26--months-supply-capital-cities

Sydney – there’s currently 2.4 months of supply on the market, this figure has increased from 2.2 months over each of the past 2 years.
Despite the rise it is still the shortest month of supply for each capital city.

Melbourne – the city currently has 3.4 months of supply for sales which is the same figure as it had over each of the past 2 years.
Melbourne has the 4th lowest months of supply of all capital cities.

Brisbane – with 3.3 months of supply Brisbane has the 3rd lowest figure of all capital cities.
The months of supply figure is at its lowest level recorded over any of the corresponding week over the past 8 years.

Adelaide – has the 2nd lowest months pf supply of all capital cities at 2.9 months.
The figure is at its lowest level at this time of the year since 2009.

Perth – there’s currently 6.8 months of supply for sale in Perth, which is the highest its been at this time of year since 2008.

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Perth has the equal highest months of supply of all capital cities.

Hobart – at 4.8 months, Hobart has the 3rd highest months of housing supply for sale out of the capital cities.
The months of supply figure hasn’t been this low at this time of year since 2010.

Darwin – at 6.8 months, Darwin has the equal highest months of supply across the capital cities.
The figure is the highest it has been at this time of year since 2011.

Canberra – the months of supply for the city is at 4.4 months which is the highest it has been at this time of year any time over the past 8 years.
Canberra also has the 4th highest months of supply of all capital cities.

Higher levels of advertised supply is great for buyers, providing more options for purchase and reducing any urgency in the market to make a purchase decision.

Buyers should be able take more time to make a purchase decision in those markets where advertised supply levels are higher and they should be able to negotiate harder on the final contract price when they do decide to buy.

The opposite can be said for vendors.

Markets where months of supply are high indicate conditions are generally more favourable for buyers.

Vendors may need to be more willing to offer a greater amount of flexibility in their sale price and be prepared for a longer selling period if they aren’t prepared to reduce their price expectations in line with market conditions.



Want more of this type of information?


Cameron Kusher

About

Cameron Kusher is Corelogic RP Data’s senior research analyst. Cameron has a thorough understanding of the fundamentals such as demographics, trends & economics. Visit www.corelogic.com.au


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