Australian Property News

Declining sales not always negative

Posted on Thursday, December 01 2011 at 11:07 AM

As the September quarter delivered a patchwork quilt of sales results across the nation, a larger than average decline in sales activity for one particular area shouldn’t always be interpreted as a larger than average drop in buyer demand. Rather it could be the sign of a tightly held market, according to PRDnationwide research director Aaron Maskrey.

Real estate agents might be testing their will to remain in the game in many parts of the nation right now, however property investors need to look behind the figures when investigating sales activity data on individual suburbs, particularly when the median price for that suburb doesn’t appear to have declined, and in some cases has actually increased, said Maskrey.

Suburbs with larger than average declines in sales activity could simply reflect the reluctance of vendors willing to meet the market and the desire to hold on through the general market price falls, he said.

“It could also be a sign of a distinct lack of supply in that market,” said Maskrey.

Real Estate Institute of Tasmania (REIT) president Adrian Kelly said there’s no doubt that “buyers are being picky” right now.

The REIT September quarter data released last week reported further sales activity decline in Hobart and inner suburbs, areas that had previously continued to transact despite the falls in outer suburbs.

While the September quarter was a time of catch up for these inner areas, some of Hobart’s more tightly held suburbs, such as New Town, reported a 36.8 per cent decline in sales activity despite just a 2.5 per cent drop in median price – not a bad median price fall when compared with other suburb median price movements.

Kelly said that New Town is a good example of a tightly held market with typically strong demand.

It’s also a suburb where vendors aren’t so interested in meeting the market and instead are content to continue holding, he said.

Considering these factors, while the decline in sales activity does tell a story about a suburb, it’s not necessarily a negative indicator.

He said a good way to gauge a tightly held suburb is to look at sales data online to see the volume of sold properties in the past month and compare it to the current ‘for sale’ stock volume.