Brisbane and Perth residential stock on market declining, while Sydney static and Melbourne at new high

Just like the economy, the housing market represents the forces of supply and demand. Real estate prices will move depending on whether demand for housing is increasing or reducing. And likewise, when supply of housing is increasing or falling. The two forces that make up the market are constantly moving and can be influenced by each other.

The number of residential property listings in the market represents the total current supply of real estate available to buyers*. Since 2010 the supply of residential real estate, as measured by the number of online listings, has rapidly increased. Its low point was in April 2010, when there were 219,000 listings offered nationwide. As at the end of June 2012, there were 387,000 listings – an increase of 76.6%.

Some argue that an increase in listings maybe a healthy sign of the market as it may mean vendors are becoming confident of selling their properties at their desired price. However, all the evidence suggests that total listings rise when there is a downturn in the market due to the fact that vendors are not able to sell their advertised properties within the desired timeframe. And as new vendors enter into the marketplace, they are competing with the existing vendors, thereby creating a build-up of stock.

The ABS reports that national house prices have fallen by 6.1% since the June quarter 2010.

The advantages of watching this measurement of the market is that the data is very timely and the data is complete. These days, real estate listings are updated almost on a real-time basis and are traceable due to the fact that over 95% of all real estate listings are being advertised online (as opposed to print only). SQM Research monitors these online real estate listings via the country’s major real estate listings portals including Domain and real estate.com.au, among others.

For those who are interested in this measurement, SQM research has charted this information on every postcode In the country back to 2008. You will find this information available for free on our website, www.sqmresearch.com.au

Right now, we are witnessing various trends when considering the listings at the capital city level. For Perth and Brisbane, we are now recording trends that suggest total listings are peaking and slowly declining, which suggests to us that there might well be more buyers in these two markets than what was the case 12 months ago.

RP Data research also shows that the number of listings in Perth and Brisbane is declining.

*excluding what is called shadow stock (properties that are known by some participants, e.g real estate agents, that might be available if the price was right, but for now, it is not being advertised.)

On the other hand, Sydney is not at this stage recording any material decline in listings. Rather, stock levels are elevated when considering historical supply. That said, listings no longer are increasing as what transpired over 2010 and 2011. This suggests to us that the housing downturn Sydney is experiencing is no longer getting worse, however market condition could not yet be described as "improved".

Meanwhile Melbourne as at the end of June recorded a new high on our index.

While Hobart is at near the high on our index, however it seems listings may have peaked over recent months.

Overall, given the amount of stock on the market we believe it is a clear indication of a buyer’s market, whereby buyers have plenty of choice and, barring exceptions, are in a better negotiating position.

Some have argued that many of the listings may represent sellers who are not willing to meet the market and so the supply numbers may be overstated. We believe that such an assessment is rather simplistic. The reality is that the property is being offered for sale, which is competing with other properties on offer in the market place. Our advice for those who have their property on way above the market is to either meet the market or withdraw their property. Given the fact that the market is not moving up, it is very unlikely such properties will sell in this current state of the cycle.

In the end, sellers who take this approach are wasting their own time and advertising dollars, not to mention the efforts of those working with them to sell the property.

Louis Christopher is managing director of SQM Research.