Sales Volumes And Market Sentiment - April 2023

By Guest Blogger, Terry Ryder, founder,

hotspotting.com.au and propertyU

Media obsesses over median price movements as the best – indeed the only – monitor of property markets.

But reports on what happened to median house prices in the past month, quarter or year tell us what happened – allegedly, because the various sources often disagree – in the recent past.

That may be interesting, but it doesn’t tell us what will happen in the future.

And the future is what most Australian consumers want to know about.

Consumers trying to make decisions about whether to buy or sell, or where to sell or buy, need information that provides a clue to price movements in the future.

Knowing what happened to prices last month or last year doesn’t necessarily assist, because often the past does not inform the future.

When prices in Sydney or Brisbane started to come off the boil early in 2022 – well ahead of the interest rate rises, I would emphasise – it came as a surprise to economists and journalists who thought prices would continue rising because that’s what happened in the recent past.

They failed to see the change coming.

Equally, they failed to understand that cities like Perth and Adelaide, as well as many regional markets, would resist the price decline that occurred in the biggest cities.

I say all this because we at Hotspotting predicted all those events. We expected price decline in the biggest cities, well ahead of the interest rate rises, and we forecast ongoing strength in the markets of those smaller cities because we monitor sales activity – i.e. the number of sales.

Sales volumes are a wonderful forward indicator of what might happen with prices – so we analyse sales activity for every town and suburb four times a year.

In simple terms, if sales volumes are rising quarter by quarter in a particular location, there’s a strong likelihood that prices will follow that trend.

If sales volumes are falling sharply, quarter by quarter, then price growth is likely to come to a halt, or prices may fall.

The key to using this as a method of predicting price movements is that there’s a time lag. Prices don’t react immediately to changes in market activity. It takes time for buyers and sellers to understand that change is under way.

No one rings a bell to mark the bottom or the top of the cycle. Usually people find out something has changed when they read about it in the media and by the time that happens it’s already old news.

Regular monitoring of sales activity in markets across Australia allows us to see the changes in price performance, before it happens.

So what does the latest analysis tell us about what to expect with prices as 2023 unfolds? Some of the key tends are these:-

• There were signs of revival in Sydney in late 2022/early 2023 and that is starting to produce small increase in median prices
• Perth, Adelaide and Darwin continue to produce solid sales activity and prices in those cities are holding up well against the downturn pressures
• Key regional markets continue to attract good buyer demand – e.g. many locations in Regional Queensland still have busy markets, but that does not include the Gold Coast and the Sunshine Coast which are well past their peaks in terms of sales activity
• That trend also applies to some of the iconic Sea Change locations elsewhere in Australia, including Byron Bay and the Central Coast – which have had extraordinary price growth in the recent past but sales activity has dropped considerably.

As we head deeper into 2023, I expect sales activity to pick up in more of the markets across Australia. Consumer sentiment is quite strong (as depicted by the recent Westpac index) and the pause in the cycle of rising interest rates will add to that improvement.

We are likely to see more property owners list their property for sales and higher listings levels will generate more market activity.

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