Key takeaways
There’s no need to complicate matters, because there are three key housing demand dynamics which control property prices in suburbs, cities and regions. These key dynamics are:
1. Population growth and movement
2. Purchasing power, or the availability, cost, and need for finance
3. Properties, or the relative surplus or shortage of suitable housing stock
Using these, some analysts still get it wrong because they rely on only one of these indicators, such as projected population growth, to make their predictions.
This can easily lead them astray, because the three dynamics always operate together.
Which dynamics predict future property performance?
Despite the obvious importance of making accurate property market forecasts, the industry is rife with ineffective and even inaccurate prediction methods.
So let's look at the three key dynamics that predict which way prices are likely to move.
Experts utilise many different performance theories and metrics to make their property market forecasts.
Some rely on the property market cycle of endlessly recurring booms and busts, others bank on the notion that property prices double every ten years or so, and yet others search for so-called “hot spots” where increased sales may indicate growth potential.
A few analysts rely on a wide range of metrics to make predictions, with some even claiming to use thirty or more, but the more stats they look at, the more confusing the future can appear.
There are three key housing demand dynamics
There’s no need to complicate matters, because there are three key housing demand dynamics which control property prices in suburbs, cities and regions. These key dynamics are:
- Population growth and movement
- Purchasing power, or the availability, cost, and need for finance
- Properties, or the relative surplus or shortage of suitable housing stock
Using these, some analysts still get it wrong because they rely on only one of these indicators, such as projected population growth, to make their predictions.
This can easily lead them astray, because the three dynamics always operate together.
The three key dynamics always work in combination
This table illustrates just some of the possible ways that these dynamics can work in conjunction, and the potential changes in prices that they generate.
Even though there are only three key housing demand dynamics, there are twenty seven different ways that they can combine.
For example, property market booms will only occur when there’s more buyer demand, increasing purchasing power, and a shortage of available properties.
Crashes, on the other hand can only take place where people are moving away, purchasing power is decreasing and there’s a surplus of available properties.
All other market conditions, from strong growth through to heavy falls are caused by variations in the three key housing demand dynamics.
This is how every property market from suburb to city, operates.
