How to measure the state of the property market

There doesn’t seem to be a week go by without conflicting reports of a predicted property boom or bust.

The truth is property values do follow a cycle – values rise, remain steady or even decline during certain phases of the cycle. And very often, while one area appears to be cooling or on the down, another area will be enjoying a rise in property value.

So how do you measure what’s happening in the market? Here are a few metrics to consider monitoring:

Historical data

There are plenty of historical graphs showing when property is on the rise or is taking a downturn. The key to using this method is predicting when prices are at the bottom of a trough rather than buying when they are at the peak.

State of the economy

If the economy is booming – nationally or locally, or both – then there is more money around. People are more likely to have job security, better finances and so are more confident when it comes to borrowing money.

Auction clearance rates

Rising auction clearance rates tend to indicate the market is on the rise.

Supply and demand

The market does fluctuate depending on the supply and demand (ie the ratio of available accommodation to purchasers). Generally if more property is on the market, then it indicates a buoyant market.

However, it can be a double edged sword. If there is too much property, then it is possible the prices will stagnate – think of some of the redundant mining towns where property prices have dropped and many lay empty, compared to premium property in inner city Newcastle.

If there is a demand for a particular type of property, or property in general and new land is being opened up (take for instance the new 115-lot subdivision in Heartwood Estate Edgeworth), then property prices will rise.

Ability to get finance

We believe this is by far one of the most accurate market predictors to use. If finance is hard to get, then there are less people in a position to buy. This leads to fewer properties going to auction or being sold through private sales, and properties staying on the market for longer periods of time.

Quite simply, the easier it is to get finance, then more people are in a position to buy a property. This leads to higher prices and faster selling rates.

Remember the last financial crash? The GFC of 2008. Banks made it a lot harder for people to get a loan, fewer properties were being put up for sale as property owners sat tight (unless of course people were having to sell for financial reasons), and property prices consequently sunk.

How you arrange your finances are very often the key to successful property investment. Make sure you’re properly informed of all the options for your situation and you are aware of the risks involved by speaking to a financial advisor.

Want to know more about how property management and investment works? Our knowledgeable and experienced team would love to help.

With over 40 years of business in the area, we are one of Newcastle’s longest established real estate offices, so give us a call on 02 4956 9777 or pop into our Cardiff office for a chat.

For more investor and property management tips check out our Facebook page: