Days on Market - Why is this relevant?


We’ve all been online or driven passed a certain property that has been on the market and listed for some time.  Most come up with the same conclusion that “it’s overpriced”, or “there must be something wrong with it”. We haven’t even inspected the property and this negative perception exists purely because all property should sell, right?  It must be that the expectations of the vendor selling the property are too high for what the market is willing to pay? 

Whatever way you look at it, the negative perception only grows the more days a house is on the market and it can only mean one thing – downward pressure on pricing.  Realistically the demand falls on a property after its been listed for more than a month and only continues on a downward trend until it can attract a new buyer at a lower price point. 

The same can be said for the rental market.  If a property hasn’t been leased within a month it can only mean that the asking rent is too high for that property.

Stock levels also have a bearing on how long a property can take to sell.  If there is an oversupply of property at that point in time the demand for each property will drop creating headwinds for pricing.

The opposite is true in a rising market.  I’m sure we’ve all been frustrated at missing out on something.  You have your heart set on the property, worked out all of the changes and additions you are going to make to the house, only to realise you have missed out because it’s gone and someone else bought it. 

In a hot market when stock is tight, days on market will drop and buyers need to become more active in those markets to ensure they actually secure the property.  This puts upward pressure on pricing as buyers can have a fear of missing out if they don’t get into the market immediately.  With an undersupply of property in a market, buyers can potentially pay more than market value to ensure they are beating the competition at Auctions or in negotiations.  When good stock is snapped up as soon as it’s listed or multiple offers at the first Open for Inspection, it becomes a “sellers-market” and investors need to stay vigilant and remove the emotion from the purchase and not get caught up in a bidding war.

A good example is Melbourne compared to Darwin days on market. On average, Melbourne houses take 30 days to sell and prices have been growing with that extra demand on property as people do not want to miss out on their opportunities. The opposite is true in Darwin where houses are on the market 86 days before they are sold and prices have softened as a result. 

 

 

David Robbins
Senior Property Consultant - Performance Property Advisory

David joined Performance Property Advisory after more than a decade of successfully investing and developing residential property. David’s first hand experience ensures he is well placed to assist clients on building a successful portfolio.