Most property commentators over-emphasise median prices and the fact that they continually use this as their yardstick for assessing the condition of the property market is worrying, claims one advisory group.

“Far too much commentary about residential property these days focuses on price.  Very little is actually said about sales,” argued Michael Matusik, head of property advisory group Matusik Missive. 

Matusik said that, in the past, sales volumes and particularly sales by price range were considered far more important in assessing whether markets were performing strongly or poorly.

This is when not much has actually changed in the way the property market is fundamentally driven – it still comes down to how many sales take place and what direction they are heading in, Matusik said.

“Recent data releases by both RP Data and the REIQ provide some information about sales volumes, but most of the conversation is about changing median values, which… more often than not means very little at all.  It shows what sold rather than improvement or otherwise.”

Matusik’s views contrast with commentators such as Andrew Wilson, Australian Property Monitor’s senior economist. Wilson recently told Your Investment Property magazine that focusing on median price growth makes it possible to predict the growth potential of a market by how much it has over- or under-performed its long-term average.

“Studies show that since the 1930s, prices growth across locations usually aggregates to about 10-11% a year. We know this is able to remain consistent because of one primary driver: the aspirations of Australians to own their own home. It is this factor that keeps demand up.”  

Wilson said that price growth tends to ebb and flow. Markets go through periods where price growth is high, sometimes even exceeding 10% a year, before hitting a ceiling. Prices grow to a point where they become unaffordable to the buyers they once appealed to, who now move onto other, cheaper suburbs.

This ongoing trend, repeated in every market across Australia, means a lot of market activity can be predicted by analysing price growth, Wilson said.

Still, Matusik claims that sales volumes provide a better snapshot into what is really going on in a market.

“A recovering market has, among other indicators, improving sales volumes.  A market in upswing has ‘fast’ sales, a downturn market has flat or slightly falling sales volumes and a market in decline/trough has declining sales.”

Matusik added that sales volumes are a great predictor of the future direction of prices and whether the property environment could be considered a buyer’s or seller’s market.

“All buyers should also want to know about how many sales actually take place around the price they paid for their property... I would also be interested if that market size had increased in recent years, so that I could estimate the resale market’s depth when it comes time to resell in the future.”

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