Rising sales volumes will likely lead to rising prices: Terry Ryder
The day-to-day research we do at hotspotting.com.au continues to throw up locations where the number of home sales has risen significantly in recent times.
As I wrote in this column two weeks ago, one of the established patterns of real estate markets is that the number of sales taking place changes some time before prices react.
This happens both when markets are rising and when they are falling.
A significant uplift in the number of dwellings sales in a location will be followed, perhaps four to six months later, by a rise in prices. It takes time for the market to react to the new situation.
Similarly, prices will not react immediately when there is a sharp decline in sales numbers. Individual buyers, initially, will be unaware that the market is changing.
Investors can use this pattern in the current market climate to identify areas where prices will rise in the near future – and buy before they do.
Currently in Queensland, sales volumes are rising significantly in numerous markets around the state. We detailed some of these in the column two weeks ago. But it’s not confined to Queensland.
In the inner southern suburban area of Adelaide which I call the Tonsley precinct, a cluster of suburbs has recorded a 46% rise in sales numbers in just four months. Total annual sales in the suburbs of Clovelly Park, Marion, Mitchell Park, Seacombe Gardens, St Marys and Sturt, four months ago, was 266 houses sold. The latest update shows annual sales totalling 388.
These suburbs still have median prices a little lower than 12 months ago, but price rises are likely later in the year. This cluster of suburbs has multiple attractions, including affordability (most have median house prices in the $300,000s), good transport links to the CBD and proximity to a precinct of education and medical facilities, which include Flinders University and the Flinders Medical Centre.
This factor, which creates strong rental demand from people attending those institutions as workers or students (vacancy rates for these suburbs are 1% or lower), will be enhanced by the evolution of a new education precinct at Tonsley Park, formerly the site of a Mitsubishi plant.
A number of locations in Perth are also delivering significant lifts in sales volumes. Rockingham City beside the ocean in the south of the metropolitan area, four months ago recorded annual house sales totalling 1,580. The most recent figures show annual sales numbers have risen to 1,905 – a rise of 21% in four months.
Similarly, annual house sales in the inner southern suburbs of the Murdoch precinct have risen 8% in the past four months.
Melbourne overall is less likely to be seeing this phenomenon, because the state economy is weak and key markets are over-supplied. But still, within the Melbourne metropolitan area, there are markets where the number of home sales is increasing.
The suburbs around Dromana on the Mornington Peninsula, including Rosebud, Rosebud West and Safety Beach, have recorded a 10% rise in sales volumes in the past four months.
This is a key indicator for investors. Locations with strongly rising sales numbers – and/or strong rising residential rents – are likely to see a subsequent rise in prices.
Terry Ryder is the founder of hotspotting.com.au.