Home > Uncategorized > Australia: New Phase? Rental Listings Acceleration (corrected)

Australia: New Phase? Rental Listings Acceleration (corrected)


I have recently noticed that, in most states, and for Australia nationally, the market seems to be entering a new “phase” – and be “phase”, I here refer to either the rate of change in sales or rental listings outstripping the other.

The sale-rent ratio seems to be capturing this quite well, for each state and nationally, with the peak and trough pair (where a peak and trough pair here make up a “phase” or “period”), seemingly occurring every 3 or so months or so [edited: wrote 6 months originally]. This could be considered seasonal, and probably is, though there are two interesting points to also consider:

  1. The sale-rent ratio seems fairly well “contained”, cycling in a relatively narrow “band” that seems fairly unique to each state;
  2. There is probably a “competitive tension” between the sales and rental listings, where relatively speaking, for a given state or region, either sales or rental listings can only “get away” from the other so far before is represents a market opportunity, and the trend will turn around again. Those of you familiar with “harmonic tension” in physics or engineering will be able to see an analogue here.
And so it seems that the “competitive tension” and/or “market opportunity” and/or “seasonality” is turning again, almost on cue (if you take the “harmonic” sale-rent ratio seriously, which I am certainly starting to)…
As you can see, the National sale-rent ratio seems to be “turning down” again – and there are a number of scenarios within which this can happen – but in this case, at this time, it seems to be occurring via the relative rate (ie. %) of rental listings increases occurring faster than the relative rate of sales listings occurring. Consider the following realestate.com.au data sales and rental listings index chart:
Rental listings appear to be increasing fairly quickly, though this is not without historical analogue (see other parts of the last ~14 months of data), but with the difference this time being that the “floor”/trough for both the rental and sales listings being a fair bit higher than other floors in the past 14 months.
I could speculate as to why this might be occurring, but I am more interested in simple data analysis here at The ‘BurbWatch Project blog (but I will not stop others from speculating, should they wish to do so).
Regards,
Stewart
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Categories: Uncategorized
  1. The_Mainlander
    November 13, 2011 at 6:31 am

    Hi BWP,

    this is really great work, thank you as always.

    Looking at the last slide and your indexed data, it could be that speculators are now experiencing such slow turnover and indeed falling values that they may be desperate for income to pay their ‘rent’ of the cash they have borrowed.

    In fact, I think this reminds me of a quote, when a bubble pops capital is returned to its rightful owners!

    This may well be the solidification of that moment known as a Minksy Moment – just before everyone tries to get out of RE.

    Also, looking at the chart, at the 16-10-2011 with the “Indexed Rental Listing” could it be anymore exponential and it is near vertical.

    That is one very scary trend for RE speculators I would suggest!

    TM.

    • November 13, 2011 at 10:22 am

      Hi, TM, thanks for visiting.

      As you suggest, it is possible that the recent stagnation, and in some places, falling median values, may be pushing owners with properties on the market to switch to rental, in the hope that there will be a time in the not to distant future where their capital values might recover.

      In fact, it’s probably not out of the question that this will occur for some, in some areas, especially those that might benefit the most from the stimulus of interest rate drops, govt measures, one-off events (such as the Commonwealth Games on the Gold Coast), etc.

      As for the rental surge – yes, it is quite significant but it is also not without a recent analogue. If you observe this time last year on the Indexed Listing chart, you will see much the same sort of rental listings spike. This indicates to me that the current spike is, at least, a seasonal factor; there are probably other factors involved, but this is most certainly, in part, a reaction to the pre-Christmas slowdown, where (so I’ve heard) listings for both rentals and sales tend to surge.

      As a result, I would suggest is not so much whatever is happening now that is important, but the context of what it has been happening within, as to whether one should be “scared”, or not, as you suggest – that is, what have sales been doing? And what is the cyclic trend (as seasonality most certainly plays a major role in all of this).

      I will do a quick mini-post, with updated data, to expand on this.

      But, keep in mind that it is basically just a few states that are driving this trend – mainly NSW, QLD and VIC – so there is definitely a fairly large distribution of results and trends around the country.

      Cheers,
      Stewart

  2. November 14, 2011 at 4:06 am

    Hi Stewart,

    WOW!

    Thank you for your awesome reply and subsequent second post – great information.

    As a data novice with these data sets it is easy to get the wrong idea. (oop!)

    Greatly appeciate your insight ang guiding hand here.

    As you are aware (I think) I am not an economist but an interested party in RE and I am most definitley an RE bear.

    Caveat Emptor and all that but I also think that RE also suffers from less pure interference than ‘we think’ – it is not a ‘free’ market in the sense of government and other forces intervening.

    Still I will be a bear for a while yet – and your data supports my subjective perspective as a Renter in Vic!

    😉

    Thank you.

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