Days on Market Indicator of Market Stability

 

There’s no doubt the Hunter has been experiencing a bit of a golden period in real estate, with rising prices, quick turnover and strong buyer interest in the region. But with prices finally starting to cool in Australia’s capital cities on the back of a number of factors, the big question is whether these conditions will flow on to the Newcastle region.


Newcastle real estate agent Andrew Pritchard (Hart Property) is among those who believe the tide is turning locally, with a number of “pressure signs” popping up during the past six months. 


“During the last 12 months while all suburbs have seen good positive price performance, in the last six months pressure signs have been evidence of a turning market,” Andrew said.


“I started talking about it back in February when we started to see a little bit less volume of buyers coming forward, and buyer inquiry had probably slowed.


“We were also starting to see the first signs of what we call ‘days on market’, which is how many days the For Sale sign is up, and they started to lengthen. Where previously, during the boom, we were moving properties inside of 30 days quite easily, now we were starting to head out towards 40 and so forth.


“In talking to some conveyancers and I suppose from my point of view as an agent as well, there was also a distinct change in the market in late April, early May, where there was a distinct drop in settlements going through, there was a distinct drop in new listings coming on the market, there was a distinct drop in buyer inquiry, and days on market for properties were starting to step right outside of 45 days, which is the sign of a slow market.”


But while the principal of Hart Property believes several key factors are taking some of the heat out of the market, he said it is more a case of prices flattening out, rather than heading for a fall.


“I think a few main factors are coming into play,” Andrew said.


“I think the Banking Royal Commission has forced the major financial institutions to review and tighten up on their lending profiles and I think there has been a distinct change in the marketplace if you talk to buyers and brokers that the days of getting finance from a larger institution within 48 hours have now gone.

 

“I think another factor, which to some degree has played out or is starting to play out, is that investor money has dried up. We saw signs of that drying up over the last 12 months, particularly Sydney money coming into town, it's not as prevalent as what it was.


“Where previously I think investors were happy to move forwards on properties where investment yields were around the three-and-a-half per cent if they can foresee a little bit more capital growth, we’ve probably hit that ceiling now if they can see the top of the market coming, because all they’re going to get caught with is a three-and-a-half percent yield with the prospect of maybe some devaluing over the next 12 months.


“As a result, I think a lot of the investors have pulled back in terms of where they want to be in the marketplace.


“The other thing, and it’s really more of a subjective statement, is that I think there's been a bit of realisation from the market that prices just can't keep going up and up and up and up.

“I think there will be a definite period of natural readjustment for the marketplace and some of that will be brought upon us by the restriction on lending, as well
as a possible interest rate rise at some point in the future, although when
that will occur, we don't know.”

While Andrew’s predictions might not be music to the ears of vendors, the news is not all doom and gloom, with some suburbs certainly showing signs of resilience.

 

Sales figures for the first six months of this year, compiled by Andrew using reports from Property Data Solutions, highlight a number of local suburbs that have recorded significant gains including Jewells, where the median price has risen by 12 per cent to $730,000. Whitebridge (22.5 per cent rise with a median price of $845,000) and Lambton (19.8 per cent rise, median price $742,500) have also shown positive growth according to Andrew.


“I still think there is value for people in our region that have got the money to spend,” he said.
“As long as they’re not relying on moderate to higher levels of debt funding, for the people that have got cash, there is still some excitement in the marketplace, without question whatsoever.


“I think that will continue particularly in some of the more middle of the road suburbs - some of them are having a late run, such as Jewells. Suburbs such as Redhead are still holding their own; they're still showing elements of positive price growth.


“Whereas if you look at suburbs like Merewether for argument’s sake, which is traditionally the golden goose, for the first time in a long time it's shown some negative value, and it's been a long, long time since we've seen that.


“I think at the moment the property market is at the apex of a turning point.


“I think there is still some positive price performance to come out of the market in certain suburbs. I think other suburbs are going to take the turn a little bit earlier, but I’m not suggesting for any second that I think we're going to see any sort of significant correction, I don't think that's going to happen.

 

 “But anyone that’s looking to come into the marketplace now has to be doing it from a very square base of understanding their affordability, understanding what their debt profile looks like and budgeting for an interest rate rise or possibly two, at some time in the next two years.”


Andrew said anyone interested in understanding how the changing property market is affecting them can email their suburb, as well as the number of bedrooms, bathrooms and car spaces their property has, to pricecheck@hartproperty.com.au


“It’s a free service, and in reply, we’ll send you a property report detailing price point data, sales activity, days on market and demand trends,” he said.


“We’ll also provide our professional opinion on the market outlook for the next 12 months.”

 

 

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