With the current number of active listings in Perth falling below 5,500 this week, concerns have arisen about a shortage of homes available for sale. However, it is important to determine whether this shortage is primarily caused by a lack of properties entering the market or if it is driven by the high demand and swift pace at which buyers are purchasing them. To address this question, REIWA Research has conducted an analysis of statistical data and trends spanning the past 14 years.
“Sales volumes have surged by 63 percent since 2019”
Buyer demand is reducing active listings
The low level of active listings can be attributed to the strong demand in the market. Active listings are defined as the properties listed for sale at any given time and are calculated by adding new listings to existing ones and subtracting sold listings. Sales activity, as depicted in the graph below, remains consistently high, with numbers reported by REIWA members surpassing pre-COVID levels and maintaining the elevated levels observed in recent years.
Comparatively, the number of new listings for sale is slightly lower than in previous years, although it remains 13 percent higher than in 2019. In contrast, sales volumes have surged by 63 percent since 2019 and have consistently exceeded the number of new listings by 15 percent since mid-April 2023. Consequently, this disparity has led to a decline in active listings.
Historically, sales volumes have typically been 15-30 percent lower than new listings, allowing active listings to accumulate. The current situation, where sales volumes are significantly higher than new listings, is unusual and has occurred only a few times in the past 13 years, and never for two consecutive months.
Are there less sellers?
While other states are experiencing undersupply, Perth finds itself in a different position. The decrease in active listings in Perth is predominantly due to demand, whereas in the East Coast markets, it reflects the sentiment of sellers. The distinction arises from the significant price drops experienced in the Eastern States when interest rates began to rise last year. As a result, many sellers have been waiting for prices to recover before placing their homes on the market. Western Australia, on the other hand, has demonstrated greater resilience and maintained its property values despite rising interest rates, making it more affordable.
In 2021 and 2022, there was a surge in new listings as many individuals who had been waiting to sell during Perth’s prolonged downturn took advantage of the increased demand and capital growth. However, this spike has since subsided. Recently, new listings have declined as a result of seasonal trends coinciding with the cooler weather, similar to the pre-COVID pattern. It is not uncommon for fewer people to sell their properties during the winter months.
The current market conditions are unique. Properties are selling within approximately two weeks, and the scarcity of rental options has led many individuals to wait until they find a home to purchase before listing their current property. Buyers are becoming more discerning, necessitating more time for them to find the right property before they consider listing their own. Furthermore, delays in building completions are also contributing to homeowners staying in their current residences. As building completions increase, it is anticipated that more homes will enter the market.
Should buyers worry?
Buyers should exercise patience and persistence. New listings continue to appear on the market. However, due to the swift pace of sales, buyers must ensure their finances are in order so they can act promptly when they find a property they like. In most cases, they will not have the luxury of revisiting a property a few weeks later after assessing other market options, as it is likely to have been sold by then.
It is expected that new listings will improve as we transition into the spring season and as building completions increase. Nevertheless, it will take some time before the market returns to a more balanced state. The growing population will continue to drive demand for property. Additionally, the challenges and rising costs within the building industry, along with rental market difficulties, are prompting more people to turn to the established homes market.
Until these conditions ease, the high demand and rapid pace of sales will keep active listings at a low level. While properties are entering the market, buyers must maintain patience and persistence in their search.
