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Know Your Numbers

RP Data’s head of Products Greg Dickason reveals the numbers you need to know to plan the year ahead.

So know your numbers. I’m a real estate agent  how do I know what my local area’s going to do in the next six months? How do I plan so that I get the buyers and I get the vendors and I can pull them together? For me, the big number, (there’s a couple of numbers), but one of the big numbers is the time on market. If I look at how time on market trends, that’s the length of time it takes from listing the property to selling the property, that changes and it changes quite dramatically. Over time it can go up to over 100 days, and in places like Sydney at the moment, it’s down to 29 days.

What time on market does, is it gives you a forward indicator of what’s going to happen to prices because almost always you’ll see time on market change before prices change, so if you know time in market’s coming down, properties are selling faster, very quickly and very obviously prices will start to go up. You also see the same thing with discounting.

Discounting is the metric that we measure between the first list price and the final sale price. Often you’ll see a gain there that as discounting shrinks, as vendors take less and less price change off before they sell their property, so prices obviously get better. Vendors get more confident and agents obviously get better sales.

There are other trends of course too, and one of the big ones at the moment is that 40 percent of properties are being sold to investors, so if you’re a real estate agent, you should know who your buyers are! One of the big trends is to see what kind of rental stock are you seeing on the market now? What price ranges are we seeing being sold? What are the number of sales and what’s the number of listings? If the number of listings is much higher than the number of sales, again, it’s going to indicate a soft market. If the number of listings is less than the number of sales, obviously it’s going to indicate a better market or a market that’s going up.

With investors especially, you can see the current rental trends, especially in rental yield and occupancy. You get a real feel for whether investors going to stick around, or if are they going to start to pull back because their capital gains and their yields are not as good as what they had expected. One of the big things that surprises me about the  current market is that 40 percent of buyers are investors are purchasing properties. Why when you’ve got an open home don’t you get a rental appraisal automatically?

I’d say probably one in five, one in ten open homes that I go to actually have a rental appraisal like this. If I’m the investor, I can pick it up and I know what I’m going to get in terms of rent for my property if I purchase their property. Often the real estate agent doesn’t give me the full picture, they’ll only tell me you can buy this property for X, this is what the vendor wants. They don’t tell me this is the rental you’re going to achieve, this is the kind of depreciation you can get if you want to depreciate this to minimize your tax. For me, it’s about actually catering to those buyers, but also keeping an eye on those numbers.

Time in market, your discounting trends, the total stock, how much is selling and how much is being listed, and your rental yield and your gross rental returns.

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