Our August results were keenly watched. As we approached spring, August promised us insights into how the traditionally busier months leading into Christmas might shape up.
When we look at the market, we consider both prices and liquidity. And of these two areas, for us, liquidity is the most important. It’s the most important because it’s the best indicator of future sales activity and price movements.
Liquidity is another word for the speed or efficiency of the market. It won’t be surprising to our customers when we say that when the average number of days it takes to sell a property increases substantially, the total number of sales will drop, and it’s also likely that property prices will likely decline in the short to medium term.
This is why we focus so much as a group on the days on market number. That’s the average number of days it takes to sell a property. It’s the best indicator of liquidity, and therefore an indicator of future price changes.
We’ve seen days on market steadily increase since the end of 2021. Days on market differ between auctions (lower days on market) and private treaty (higher days on market), but both have increased approximately 35 per cent from December 2021 to August 2022. This rise in days on market reflected an increasing disconnect between the expectations of sellers and buyers, amid rising interest rates and international volatility. The market shift highlighted by the increase in days on market was eventually picked up by the published price indexes from March 2022 onwards.
Over the past one to two months, we’ve seen a flattening out of the days on market metric. The gap between sellers and buyers has narrowed, with sellers reducing their price expectations and buyers staying relatively the same. We expect to see price indices reflect this trend when they’re published in the next few months.
In August in Australia, we sold 4,934 properties, which was 10 per cent down on August 2021, but 10 per cent more than August 2020. Nearly 5,000 sales in August is a very strong number in historical terms, even if it’s below the record highs of 2021. In dollar terms, we sold $4.2 billion of residential property in August, only six per cent below last year’s record of $4.46 billion.
As we prepare for the spring markets, we’re seeing strong numbers of sellers preparing their properties for sale. We’ll be closely watching days on market as stock levels rise, and as the market continues to absorb volatile economic news. Whilst it’s not possible for anyone to predict days on market, we suggest to all our seller customers that they carefully consider how they can minimise their own days on market in light of this volatility.
All of our data and insights shows that days on market are reduced when our customers choose the auction method of sale, combined with investment into a property marketing campaign. This method ensures we maximise buyer competition, and by doing so, we create urgency amongst buyers. Nothing gives buyers more confidence than seeing other bidders in action, which is why for the past 120 years we’ve lived and breathed the auction process and believe that we’re the Competition Creators® when it comes to achieving the best possible result for our customers.
Dan White
Managing Director
Ray White Group
