· Decline in stock for sale contributing to growth in competition for high-quality stock
· Buyer’s agents report 25% drop in list of approved properties
· Investors warned not to overlook growth fundamentals in their property selection
A recent analysis by Perth-based buyer’s agency, Momentum Wealth, suggests that buying competition for high-quality stock is heating up as listings for sale continue to tighten.
The study, which analysed the performance of Momentum Wealth’s list of approved properties across the June 2019 quarter, showed that the properties spent an average of just 36 days on market – significantly less than the Perth market average of 82 days (REIWA).
Team Leader of Momentum Wealth’s buyer’s agents, Emma Everett, said the study was an important reminder that headline figures don’t always reflect all areas of a market.
“These figures, and the factors that drive them, can differ greatly between each pocket or suburb so it’s important to do your research on the individual market and not rely just on average statistics.”
“If we narrow the analysis down to individual areas, good quality stock in high-demand suburbs is moving quicker than most people think, with some of the highest demand suburbs averaging as low as 35 days on market” she said.
Momentum Wealth’s analysis coincides with recent data from the Real Institute of Western Australia, which showed that sales listings across Perth dropped to their lowest level since late 2014 in August 2019, with just 13,831 properties listed for sale on reiwa.com.
Mrs Everett said this reduction in stock has been one of the key factors driving higher levels of buyer competition.
“Whilst there are a number of factors driving the growth in competition for properties in our preferred areas, the decline in stock is definitely playing its part,” she said.
An annual comparison of Momentum Wealth’s shortlists showed that the number of properties approved by the buyer’s agents was around 25% lower than the figure recorded in the same period for 2018.
“This is a sustained trend we’ve noticed across 2019, and it’s something we expect to continue as stock tightens further as we move into spring selling season,” Mrs Everett said.
Mrs Everett noted that the competition for quality stock has also translated into lower discount rates for the consultancy’s approved properties.
“The discount rate for our approved properties in the June quarter averaged at just 2.97%, compared to the Perth property market average of 7.7%, which is a further sign that buyers are having to be more competitive in their offers to secure high-quality properties,” she said.
Whilst Mrs Everett believes this is a positive sign of a more sustained recovery in Perth’s higher-demand suburbs, she warned that these improvements aren’t being seen across the entire market.
“This drop in supply is boding well for certain areas, but some outer suburbs in particular are still struggling with oversupply, and even then not all properties are primed to take advantage of these conditions,”
“In some areas, we are still seeing average days on market above 120 days, so it really does come down to the individual area and property in question,” she said.
Mrs Everett said investors need to be vigilant in their choice of properties if they want to support the longer-term growth of their portfolio.
“In these transitioning markets, especially, investors need to be aware that property selection is more critical than ever; it’s about getting the fundamentals right in terms of location, property type, and growth drivers to give your property the best chance of long-term success,” she said.