30 May 2014
Our market, in the Tweed Heads / Coolangatta area has been quite strong with interest shown in all segments of the market. Of particular note is the return of interest in development sites—which had been quiet for some time.
In his 6 May blog, Michael Matuzik discusses the idea of why sales volumes mean much more than price. Following is an excerpt of the blog but if you wish to read the complete article go to: matusikmissive.com.au.
- Close to 470,000 residential sales currently take place across Australia each year. Sales are up 14% on the year before.
- Most sales take place in the eastern states, followed by WA & SA. Very few sales take place in NT; ACT or even Tasmania.
- Most investors are best buying in places with large & steady sales volumes – a place where there is already an established resale market.
- Most residential sales in Queensland are anchored in the south-east of the state. In fact, many of Queensland’s regional markets are quite small when it comes to market size.
- Sales volumes are rising in south-east Qld & in Rockhampton plus Cairns. They are falling or at best steady in the centre of the state. Those markets peaked a few years ago.
- Rising sales indicate a recovery; falling sales suggest a market peak or downturn.
- At this stage of a cycle – in general, improving market conditions in south-east Qld – there are lots of media stories about the top-end of the market. Last weekend’s papers featured several articles about this.
- Keep in mind that the size of the top-end of the Queensland market is very slim – under 3% of sales by volume.
- It is often best to buy an investment property in Queensland priced somewhere in the middle of the bell-curve – so in general, between $350,000 & $500,000 in value.
Investors should always ask five questions before buying:
1. How many sales take place each year within a ten minute commute?
2. How many sales are priced within $50,000 of the asking price?
3. Are sales increasing or falling?
4. Who is currently buying property in the area? Especially how many are investors & where do they originate from?
5. How many similar properties in the area to the one under consideration are bought by owner-residents on resale?
The reasons why such questions are important:
- Know the potential size of your resale market – the bigger the better.
- Rising sales mean increasing demand, so make a reasonable offer.
- Declining sales mean falling demand, so maybe delay offer or make a hard one.
- Areas & projects with rising owner-resident demand usually are accompanied by better price growth & rental returns.
- Also areas & projects with a lot of investment buying – especially when these investors are not local – have, in the past, been accompanied by poor property performance.
For most property owners – including investors – it isn’t about price, it’s about whether or not there is a buyer at resale & if there is, how long it will take to sell at your asking price point.
It’s a pity there isn’t more conversation about sales volumes in the media & on property-related blogs. Think sales, not price.”
Source: Matuzik Missive