The current method of gauging the strength of the market is both flawed and lazy

A very interesting question was raised this to week as to what exactly is the best and most accurate way of determining the strength of the property market? For years I have argued that the current methodology is both flawed and lazy. For example in Sydney we have approximately 637 suburbs in 38 local government areas, it would make much more sense if the property data aggregators compiled data based on the local government areas to provide a more exacting position than say just Sydney.

Misleading property auction figures ‘put buyers at risk’ and “Inflated and inaccurate auction clearance rates may push misinformed buyers into the market, according to AquAsia strategist Mark Bayley. At best, these figures provide only a rough guide to a small sample of the overall sales, and that sample is inherently biased.”

Allow me to clarify this further, according to APM Property Data Mosman houses has thus far recorded 284 sales of which 223 were by private treaty and 57 by auction – which actually comes out at 280 not the 284 that they report. Mosman has an adjusted clearance rate of 43% although 61% of these sales were recorded by private treaty we see that just 20% were sold at auction. The reason why we hear so much about the clearance rates is that this is the fastest way media companies can talk the market up in an attempt to lure in vendors to advertise in their newspapers. It is as simple as that.

Last week we did an analysis of the Mosman housing market sales in 2013, 2012 and 2007 to see how the market was tracking so this week we had a look at Mosman apartments.

Mosman apartment sales January 1, 2013 to November 14, 2013.

Total – 371

Average price – $973,076

Private treaty – 273

Public auction – 48

Total value sold – $361,011,098

Adjusted clearance rate – 63%

And you’re right, the numbers of sold don’t add up they are 50 short.

Mosman apartment sales January 1, 2012 to December 31, 2012

Total – 467

Average price – $842,615

Private treaty – 380

Public auction – 54

Total value sold – $393,501,098

Adjusted clearance rate – 36%

The discrepancy this time is 33 properties.

Mosman apartment sales January 1, 2007 to December 31, 2007.

Total – 482

Average price – $852,660

Private treaty – 338

Public auction – 62

Total value sold – $410,982,261

Adjusted clearance rate – 55%

The discrepancy this time is 82 properties.

The most noticeable statistic here is that in 2007 the average price was $852,660, in 2012 $842,615 and in 2013 it has jumped to $973,076 which will get higher as there are many more sales to be recorded. Out of interest for Mosman houses in 2007, the average price was $3,035,363, in 2012 $2,852,759 and in 2013 it sits at $2,677,052 where we would expect this is to conservatively hit $3,000,000 once the properties start to sell. In September/October RWM sold over $100 million where approximately 75 million of those sales were kept confidential until settlements take place in early to mid-2014.

Interesting piece by Steve Keen who is notorious for calling the property markets incorrectly where finally he admitted in Business Spectator – I will be wrong on house prices. Given the lowest ever cash rate it looks at this point in time that the Lower North Shore property markets are in for a bumper 2014.

Forget watching the clearance rate numbers just watch the numbers of properties on the market in Virtual Realty News. In last week’s edition I pointed out in 2012 out of 52 weeks there were on 33 occasions more than 100 houses on the market. In 2013 Mosman has only broken the 100 mark on just four occasions. Based on this week’s numbers it looks like we won’t see Mosman hitting triple figures again in 2013.

Sanity prevailed over at Mosman Council this week when the elected councillors voted unanimously to vote against the proposed subdividing of Mosman into five new suburbs. The Mayor wrote in an email “I regret that in my recent Special Occasional Letter discussing the possible use of geographical names in Mosman, I inadvertently provided significant misinformation. As described there, the intention behind the council proposal for consultation on the use of historic geographic names, such as Balmoral and Beauty Point, was to allow residents the choice whether to use the local historic name or simply Mosman as was traditionally done.

Today, in response to council questioning, the Geographical Names Board advised council that it does not allow this choice. If an area were renamed, residents of that area would be required to adopt that address albeit that all areas would share a 2088 postcode.”

Well I can’t see this proposal ever seeing the light of day again.

He has also been writing real estate blog Virtual Realty News since 2000.

The RWM real estate model has sold in excess of $1 billion in database sales globally.