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Exclusive Research - Conditions Peak for Sellers

On Nov 10 2014
Tagged as:
  • Selling
  • myLJHooker Home


Research undertaken by LJ Hooker suggests the majority of Australia’s markets are leaning in favour of sellers, but the pendulum could soon swing. The research indicated five of Australia’s eight major housing markets had peaked in their rate of price growth and their advantage to sellers. The research suggested prices will still grow, but at more modest levels than previously experienced.

Exclusive Research - Conditions Peak for Sellers

It's a sellers market but the pendulum could soon swing

Is This the Peak for Sellers?

The LJ Hooker buyer/seller index shows that the national property market is strongly in favour of sellers with a record result being recorded for Q3 2014. The latest result shows the index has recorded the ninth consecutive quarter of favourable conditions for sellers.

What Does the Q3 Result Mean?

The Q3 2014 index result shows that demand from buyers is currently outstripping listings faster than any time on record. This is because a number of large capital city markets are continuing to record low levels of new listings at a time when strong buyer demand is in place. This has led to a situation where properties are selling faster than can be replenished by sellers.

Low Interest Rates has Lifted Affordabiity and Buyer Demand

The lack of listings has occurred in many instances because upgraders, and those looking to sell, prefer to purchase a property before they list their current home for sale. This has been intensified by rising levels of buyer demand. This demand has been driven by increased affordability from falling interest rates which has seen investors and owner occupiers compete for the limited amount of stock of on the market.

 

LJ Hooker Buyer / Seller Market Index
 

 

Market Favour Dependent on Local Economy

Despite the national index being strongly in favour of sellers, this may not be the case for local markets across the country. It is possible to find markets that are balanced, or in favour of buyers, with the strength and performance of state, regional and local economies deciding the index outcome. This can be seen from the state based index table which shows that 5 out 8 markets are in favour of sellers while 2 are balanced and 1 market is in favour of buyers.

 

 

Is This the Peak for Sellers?

The large growth in favour of sellers has led to the question of when will the index swing back towards a more balanced, or buyers, market? By overlaying a lead indicator we can evaluate where in the cycle we are currently sitting and forecast any future swing. Overlaying ABS Housing Finance data (buyer demand) onto the index chart we can see that it leads a swing in the index by approximately one quarter. By analysing the finance data we can see that after strong growth over recent years, the “rate” of growth in finance commitments has begun to slow. It is expected that, as a result of this slowdown, the record Q3 2014 index result may also be the peak, in terms of ‘favourability’, for a sellers.

The slowdown in the growth rate of Housing Finance also suggests that the ‘rate’ of house price growth may have reached its peak. As price growth returns to a more sustainable level and listings come onto the market, for the spring and summer selling period, the LJ Hooker buyer/seller index is expected to slowly shift back towards a buyers’ market.

Methodology

The LJ Hooker buyer/seller market index looks at the number of new listings that have occurred during a period and compares it to the number of unconditional sales during that same period. The basic premise is that;

  • If listings are higher than sales the index will result in a buyers’ market, conversely;
  • If sales are higher than listings the index will reflect and sellers’ market.
     

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