Local Real Estate Analysis
Introduction
In Australia, a lot of analysis is done on the real estate market, exclusively based on the state and national level. While this is reasonable to understand the general trends of the market throughout each state, for investors or simply someone looking to buy their next home, local trends are more relevant. The local real estate market at some location may be decreasing by some amount, but a similar market just an hour’s drive away may be increasing by the same amount, simply because people are moving from one area to the other. This simplistic view would not be captured in any state level analysis.
I have always been frustrated with the lack of more local analysis of the real estate markets. Perhaps this is due to the statistical robustness of the market at a lower level, or maybe it’s due to the sheer number of LGA’s within Australia (537). It would take quite a lot of time to undertake detailed analysis on each council area, and then to continue to keep the results up to date. Maybe, it’s just that this kind of detailed analysis should be left for the investors and the companies providing this type of analysis as a service. It’s more than likely all of the above and more.
I decided to conduct my own analysis on a local area that I am familiar with, the Northern Beaches of Sydney.
Methodology
I started by collecting all the data for the northern beaches using the Domain API on a weekly basis, sometimes twice a week, from July 2020 to the end of April 2021. After collecting all listing information, I used the filtering features and the API to determine the listing price. Unfortunately the sale price is not always available, so we will have to use the listing price as the indication for market value.
Analysis
Northern Beaches trends
The data ranges from July 2020 to April 2021 and encompasses all listings less than $5M. I do some further filtering during the analysis to focus on 2 and 3 bedroom units within the Northern Beaches.
General suburb background
I had a look at approximately 30 suburbs from Neutral Bay to Narrabeen. The majority of properties available in the 10 month period were located in the coastal suburbs.
It’s interesting that Dee Why has the most number of listings available in the search period; this is likely due to the size of Dee Why in comparison to many other suburbs in the Northern Beaches. Mosman has the largest population in the Northern Beaches, at over 28,000, but Dee Why is close behind with 21,000. Most other suburbs in the region are below 10,000, with the exception of the top 5 suburbs in our list.
The top 12 suburbs are all close to or on the coast, boasting close access to beaches and some with water views.
The price of a property will depend on many factors, number of bedrooms, type of property, and quality to name just a few. We can see that houses are typically about twice the price of apartments. However, new apartments tend to be more expensive and have a larger range of prices than older apartments.
Apartments
We will focus on the units available in the Northern Beaches, because houses are generally more expensive, and based on personal experience, there are more units available.
The price seems to increase exponentially as the number of bedrooms increase. The variance in the price also increases significantly with more bedrooms; this will be due to significantly fewer listings with more bedrooms.
Looking at 2 bedroom units, the number of listings available each week shows a seemingly monthly cycle, with more properties available in the middle of the month. There is also a downward trend in the peaks of the months during the 10 month period.
There are significantly fewer 3 bedroom units available than 2 bedroom, and the same monthly cycle also seems evident. There is a significant drop in properties over Christmas, but there still seem to be peaks in the middle of each month.
Property Sizes
There is a wide range of bedrooms available for properties in the Northern Beaches, with only a few 4 bedroom units. We can see that 1–2 bedroom properties are more popular. Dee Why has by far more 2 bedroom units than any other suburb.
Time on Market
It would seem that most unit listings in the Northern Beaches are only on the market for one week, which I think is pretty fast considering the due diligence it is prudent to undertake before making an offer. One possible reason is perhaps people are more afraid of losing the property they love, than any potential problems that may appear later on, but this is pure speculation.
Listing Prices
The price will vary wildly depending on the size of the property. We’ll focus on the 2 and 3 bedroom properties, as there is a large number of these to build statistical reliability.
There is some variation in the prices; this is likely to be partially due to the number of listings available as well as the size and quality of the properties. The early months show a relatively consistent $1,000,000 price, with a slight increasing trend from November.
We can see the monthly median price for 2 bedroom properties varies a little with a significant jump in December and April. The property count for December indicates this could be an unreliable indication of market value at this point, because there aren’t that many properties available, likely attributable to the Christmas holiday period. There appears to be some serious growth from the beginning of the year.
The price variance in 3 bedroom listings is much more significant; this may be due to the lack of properties compared to the 2 bedroom listings, but also because of the variance in quality and location.
We can see the variance in the monthly median price for 3 bedroom properties with the local market dropping $250,000 in August then increasing by $300,000 the next month. We might consider that the number of properties available each month, except December and January, just passes statistical reliability.
While the 3 bedroom unit price varies significantly, there is a 2% rise in prices over the 10 month period. The 2 bedroom price varies significantly less, with almost a 25% price increase, suggesting a reliable indication of local market changes.
We can see the variation in weekly prices change with 1 bedroom unit prices briefly exceeding that of 2 bedroom units in early October. Prices for 3 bedroom units also briefly exceed that of 4 bedroom units between Late November and mid December. We see the maximum price for 2 bedroom units reach $1,500,000 in March.
Comments
Some reports indicate that Sydney prices have risen by 2.8% year on year for February, with house prices up by 3% and unit prices up by 1.2% in that month. While this informs us about the state-wide real estate market, it doesn’t really give us any detail about the local markets we might be interested in. I have shown that in a similar period, the Northern Beaches market is significantly different to the state trends, with an average increase of about 11% for 2 and 3 bedroom units compared to the state average of 1.2%.
The median unit price for the Northern Beaches is $995,000 compared to $740,000 for Sydney, significantly different to our local analysis.
Locally, we have seen that December and January see a significant drop in listings with the real estate market taking a Christmas holiday. It would be interesting to see how the number of people searching for these types of properties varies over time.
However, there is a steady increase in prices for both 2 and 3 bedroom units with varying degrees, which is significantly different to the state level trends. This shows that using the state level real estate trend analysis is insufficient when purchasing, to buy or invest. To make an informed decision, the purchaser needs to do their own analysis on the local markets they are interested in.