Part 1 | Where did all the listings go?

28 August 2020

As part of our data analysis project this month we have uncovered some interesting numbers that show a general decline in stock across the Northern Beaches over the last ten years.

 

You will see on the column graph below, since 2010 and apart from a slight jump in 2017, stock on the market levels have reduced by approximately 40%. This could be explained by a few variables, however the greatest explanation used to describe fluctuations in property market value, is the basic economic principal of supply and demand. This principal is something that is expressed as the main driver for peaks and valleys in the property cycles we experience. Data like this is also often difficult to express in real terms unless there is compelling evidence that proves the data analysis. As a progressive business who has always valued qualified data, and what that data can tell you about trends and predictions, it is great to have a partners like REA (realestate.com.au), Domain Group and Core Logic who are willing to help us with data analytics so that we can translate that into meaningful information for our clients and property consumers.

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Source: REA Group (2020)

The graph we are using for the current analysis charts new listings to the market each year from 2010 through to 2019, so 10 years of very clear data that explains why our market place continues to see growth in values, when other markets may be struggling. The most interesting assessment of the data is seen in a decline in sales over the past 4 years which is in the vicinity of 25% so when it comes to supply demand ratios, this level of change has a significant impact on how the market responds and why things are as they are.

Seeing a gradual decline of volume of sales in those 10 years leaves no doubt that our high demand/low supply marketplace is here to stay. As such, it completely explains why values continue to grow and remain so high – it’s simple supply and demand economics at play. People are staying far longer in their homes and doing renovations and rebuilds at a rate never seen before as they realise the benefits of their location and with values at the levels they are at there appears little concern for over capitalisation. Investment properties are being treated as more of a long term strategy rather than a short term gain opportunity and therefore less are available to the First Home buyer market. This shift also has to do with the high cost of stamp duty in our state which makes the transactional costs become a determent to selling. All of this means that we have seen the average hold time for residential houses extend out to about 16 years in most locations and around 20 years in others. Apartments are also now heading towards 10 years average hold, doubling the hold time in the past 15 years.

There is also another interesting factor influencing the Northern beaches market… the much maligned “Baby Boomers”. The sea change opportunity from locations such as the Lower and Upper North Shore with cashed up buyers is putting more pressure on the available stock and as such increases the demand for the limited supply. And even despite the new developments along the coast the new supply is simply not matching this increased need of the over 55’s market, who are willing to pay accordingly.

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Source: REA Group (2020)

Although this graph tracks only the last 10 years, we have been tracking the market since 2000 and seeing the trend of less and less property being offered for sale since 2003 has enabled us to have a far greater understanding of why property values on the Northern Beaches perform like they do. In the years prior to 2010 we saw a similar but less dramatic picture with the listing and sales data showing around just a 10% decline since 2003, so this past 10 years has really seen the supply chain cut dramatically.

With so many renovation/extensions going on and knockdown-rebuilds happening its plain to see that the prospect of improving what you have got is taking precedence over moving. But are the right choices being made, maybe just to save the $100,000 of stamp duty in the move? Well that is a whole other story…

Stay tuned for Part 2 of  ‘Where did all the listings go?’