Spring 2016 Report

Demand Is Outstripping Supply

Those looking to buy a home or investment property are acutely aware of the lack of choice that’s characterized the market in the last few months.

But, while lack of supply has frustrated buyers (and agents!), it’s contributed to very competitive auctions and private sale campaigns.

Strip everything away, and the real estate market is fundamentally about Supply and Demand. Supply has been down, and Demand has remained relatively stable; the result is more interested buyers per listed property.

This graph shows the number of properties sold across Melbourne’s Northern Suburbs over the last 2 years. It highlights how unusual the last 6 months have been in two ways…

Firstly, it’s typical that fewer properties are sold in the January-June period than are in the July-December period. In the first 6 months of 2015 (Jan-Jun), 10% fewer properties were sold compared to the last 6 months of 2014 (Jul-Dec). But, in the first 6 months of 2016, 22% fewer properties were sold compared to the last 6 months of 2015. That’s a massive seasonal difference in properties sold.

Secondly, it’s normal to see some differences in sales volumes year-to-year. In Jul-Dec 2015, sales volumes were up nearly 4% compared to the same period in 2014 (that’s normal). But, in Jan-Jun 2016, sales volumes were down nearly 11%. That’s a big year-on-year fall.

Ultimately, lower supply of quality properties has probably been a good thing for the market, in that it’s perpetuated stable growth without the frenzied activity that can lead to overheating.