Property investors need to pay more attention to price points rather than generic price growth alone.
If I was to tell you that there were more home sales under $400,000 across Brisbane than say, between $600,000 & $800,000, many of you might not believe me.
A similar trend exists across most other Australian capitals, including Sydney & Melbourne; and this is definitely the case in our regional towns.
This information is very important and for a range of reasons.
Market size is important. More so, for mine, than the general direction or position of the market. Size does matter.
Buyers should know how many sales take place in their particular price category. This helps work out how long it might take to resell. It also gives a clue as to how much one might need to promote their property in the future in order to achieve a sale.
Most property sells for less than the property intelligentsia would have us believe. We largely read about the ‘good news’ in all those property investment mags and not the bad or even plain average.
Again, most dwellings sold across Australia sell for under $500,000. A third sell for prices under $350,000.
The market is shaped like a pyramid.
Sales volumes diminish as prices rise.
In general, the more you pay for a property the fewer buyers there are to resell to in the future.
That isn’t to say there hasn’t been growth in the size of the top end housing market across Australia.
Today, one in ten of our homes achieves over $1 million on sale, up from 3% ten years ago. One in fifty sells for over $2 million, up from 0.7% a decade earlier.
Another important point is that price movement isn’t uniform across a market.
Certain price points move more than others and this changes, depending on the market’s position in the property cycle.
For example, Brisbane is in a recovery phase, so the more expensive properties are starting to sell.
Whilst there has been some movement in the number of house sales priced in the more affordable sub $350,000 price range (a 12% lift) over the past three months, this is mild compared to the increase in sales priced between $500,000 & $1 million, which has increased by over 30%. Sales over $1 million are up a whopping 43%.
In contrast, during a downturn for example, it is the cheaper properties that see more growth in sales volumes.
Keep in mind that the latest Brisbane dwelling price points are:
* Under $400k 38%
* $400k to $600k 39%
* $600k to $800k 13%
* $800k to $1m 6%
* Over $1m 4%
Investors – especially those starting out, I believe – should buy a property in the larger price brackets.
There is safety in numbers.
Property in these price groups is generally more affordable, making them more ‘downturn’ proof.
When you read about generic price growth, keep in mind that not all of the market is moving at the same pace.
Some market segments may even be moving in a different direction.
There are many housing markets, even in the same city & local area.
SUBSCRIBE & DON'T MISS A SINGLE EPISODE OF MICHAEL YARDNEY'S PODCAST
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
PREFER TO SUBSCRIBE VIA EMAIL?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.