Faster house sales reflect stronger market conditions over first quarter of 2013: Cameron Kusher

RP Data's research for April shows a sharp fall in the amount of time Australian residential properties are spending on the market. This is reflective of stronger housing market conditions over the first quarter of the year.

This is a great result, but we need to question whether the current rapid pace of sales can be maintained.

Across most capital cities, the current average time on market is lower than at the same time last year.  In fact, the time on market is lower across each capital city except for Brisbane and Hobart.

Time on market for capital cities:

• Sydney - 35 days
• Melbourne - 38 days
• Canberra - 49 days
• Brisbane – 72 days
• Adelaide – 68 days
• Hobart  - 110 days
• Darwin and Perth - 52 days

Although time on market is at quite low levels it will be interesting to see whether or not these levels can be maintained with lower levels of new stock coming on to the market and the recent successive monthly falls in capital city home values.

On the other hand, sales volumes have been improving from a very low base indicating that if vendors set appropriate prices on their homes, they should be able to attract buyers and sell the home in shorter period of time.

Across the country, the average time on market for all homes is currently recorded at 60 days and at the same time a year ago, the figure sat at a slightly higher 67 days.

The national average time on market for a house is currently 62 days compared to 68 days a year ago. For units it was 61 days a year ago compared to 51 days currently.

Based on the latest time on market results, average time on market was abnormally high over the previous three months.  This performance can be attributed to a spike is seasonal activity where in January, and to a lesser extent February, the housing market was interrupted by a larger proportion of buyers, sellers and facilitators such as real estate agents, conveyances and financiers being  on holidays during the period.

Taking seasonality into account, the surge in selling time was much higher than normal over the early months of 2013. RP Data didn’t see the average selling time fall by as much as normal in March.

It is difficult to decipher exactly what has happened during this period where we saw longer selling time trends occurring in-line with a sustained drop in total listings. Potentially it could be that stock sitting on the market for a long time started to shift.  Because the time on market figure is only calculated across those properties that sell over the month, a higher proportion of older stock selling will bias the results higher.

Across the combined capital cities, homes are currently taking an average of 50 days to sell compared to 60 days at the same time a year ago.  Over the previous three months, the time on market was significantly higher; however, the figure has now returned to similar levels as those in November 2012 (49 days).

Capital city houses are currently taking an average of 53 days to sell and units 44 days compared to 61 days and 56 days respectively a year ago.  Similar to the national results, there was an unusually high average time on market for the first three months of the year.

Looking further into the relationship between the six months change in capital city home values, and the average days on market for capital city homes, we found that when values are rising, the number of days it takes to sell a home is inherently lower.

On the other hand, when values are falling or growth is more moderate, the time on market tends to be higher.  Of course this is a logical relationship but it is interesting to note that the change in direction of value movements actually tends to slightly precede the change in the number of days in market. This is indicative of the slight delay in the market catching up to the prevalent market conditions.

Cameron Kusher is senior research analyst at RP Data.