Tuesday, August 6, 2013

So...how would I define the real estate market in Wollongong at the moment?

Let me lead into this article with some interesting numbers:
Real estate agents identify market activity with a few metrics:

1.     Auction clearance rates: Sydney has seen an extraordinary rise in clearance rates since November last year. I would regard a sustained clearance rate above 60% as progressing towards an active market. Clearances have been above 80% in Sydney for the last 3 weekends. As a matter of interest, Wollongong has seen a greater number of properties going to the market via auction in the last 12 months and although I don’t have the clearance statistics for our area, you can be very sure the largest real estate market in Australia ‘just up the road’ is having an influence on ours!

2.     Listed properties: this is an influencer on the supply and demand equation. The lower the supply combined with increased activity translates into property demand. There was just over 12% less properties listed January to June 2013 compared to the previous year.

3.      Number of Sales: Generally speaking with an increased sale number comes greater activity. There was a 17.2% increase in sales for the corresponding period year on year.

4.     Days on Market (DOM): This is based on the date the property is listed for sale compared to the date of contract exchange. The lower this number then the greater buying activity appears in the market place. There is an interesting trend here with DOM actually increasing for January to June 2013 compared to the previous year. I believe this is due to older listings selling more readily this year - that is, properties that were on the market for a long time have sold due to reducing stock levels and increased demand bucking the normal statistical trend.

5.     Vendor Discounting: The difference between listed price and exchanged price. Again, the lower the number, the more activity is present. Year on year January to June, seller negotiation difference has reduced by 55%! Anecdotally I have noticed an increase in properties that sell very close to the listed price. We have also been involved in a recent sale that sold over the originally listed price due to demand.

6.     Crane Count: this is my own measure and it’s indicative of the development activity in an area = the confidence investors/developers have to spend their money...and get a return. As little as 3 years ago, Central Wollongong had zero cranes above the building line. There are now 4, down from a peak of 7 cranes earlier this year. I am aware of at least 1 new crane due on the skyline this year.

Statistics Source: EAC Redsquare Data

What does this mean?

The Wollongong real estate market has remained remarkably resilient.
June, July and August 2012 were seen as the bottom of the market with sale numbers down 30% on normal trading. This is when ‘across the board’ First Home Buyers funding ceased, combining with the traditional winter slowdown and the world news dominated by financial issues in Europe. Buyer confidence plummeted. Balanced against longer term statistics, this short term drop then united with a cautious recovery in Spring 2012 when world financial news improved and local interest rates dropped. The Wollongong numbers have generally been on a long slow positive trend since then supported by a strong winter selling season in Sydney (this is atypical in itself).

Stock levels are still down, with sellers waiting for a) Federal Election b) Spring c) End of the Financial Year to put their property on the market. We have also seen over 100 new residential units built in Wollongong/North Wollongong with many now ready to be occupied. Most of the new occupants will have a property to sell. Buyers however are out there now and complaining about a lack of choice.
Longer term prospects appear very positive, with the University of Wollongong thriving, visitor numbers up a staggering 12.4% (and therefore tourism income) from the previous year and investment and projects in the area close to ½ billion dollars either planned or underway. In addition, the NSW Government’s $100 million from the sale of the Port Kembla lease will come on line over the next 12 months.

I have every reason to believe Wollongong is travelling well.

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