We are pleased to announce that Stock on Market as well as 7 other professional metrics have been added to all HtAG downloadable reports. We will be releasing a series of articles aiming to explore the significance of these metrics for those performing data-driven market research.
Six months ago HtAG Analytics began sourcing additional data in order to enrich HtAG Property Market Insights reports with new metrics. Whilst we are continuing the data accumulation to provide dynamic time-line views for this data, we are now at a position to provide current quarter values for 8 new metrics:
- SoM (Stock On Market)
- SoM% (Stock on Market Percentage)
- Inventory Levels
- Buy SI (Buy Search Index)
- Rent SI (Rent Search Index)
- RO Ratio (Renter to Owner Ratio)
- UH Ratio (Unit to Houses Ratio)
- UHV Ratio (Unit to Houses Value Ratio)
These metrics will provide further value to our customers in that they can now perform in-depth assessment of areas for investment opportunities. In contrast to other data providers, HtAG reports all metrics for the 3 month rolling period. This data curation approach tends to better reflect the current market conditions on the ground.
In this article we explore SoM and SoM% metrics and explain how to perform suburb shortlisting based on pre-established thresholds.
What is Stock on Market (SoM)?
Stock on Market is probably one of the most straightforward metrics requiring little explanation. It is simply the number of properties currently listed for sale. Whilst SoM provides a quick supply snapshot, the reported numbers are not put into the geo-demographical context of relevant property market. Because some suburbs are larger than others, they will naturally have more total theoretical stock available.
Stock on Market Percentage or SoM% brings the different size markets to one common denominator by apportioning the SoM to the total number of dwellings within the area. Therefore SoM% is a more precise metric to go by when bench-marking different markets one to another.
So what’s a good SoM and SoM%? In order to answer this question let’s explore the data distributions of these 2 metrics in the current market.
“Low”, “Balanced” and “High” Supply Ranges for Stock on Market
It’s important to highlight that the distributions presented in this article are ‘point in time’ and are reflective of the current Australian property market conditions. These distributions change and shift as markets go through their usual cycles. HtAG updates the ranges based on the latest data on the Data Dictionary page.
We produced the histograms in this article by assigning SoM values to bins (horisontal axis) and plotting the number of suburbs falling into the bin range on the vertical axis.
Looking at the distribution of SoM we can see that a large portion of suburbs have no more than 10 active online ‘for sale’ listings for both houses and units. We can also see that only a few suburbs have as many as 60 active listings.
Vertical lines reflect quantiles for the distribution:
- Red: 5% and 95%
- Green: 25% and 75%
- Yellow: 50%
Generally speaking supply balances out at and around the mid-point i.e. between 25% and 75% quantiles. Values below 25% or above 75% quantiles (green lines) are more likely to be reflective of low and high supply conditions respectively.
In this instance, SoM values under 5 are reflective of “low supply” markets for houses.
Difference Between SoM and SoM%
Given that SoM of 5 can mean different things in a suburb with 100 dwellings as opposed to a suburb with 1,000 dwellings, we need to benchmark the actual number of listings against total stock.
Meet Stock on Market Percentage or SoM%.
SoM% is calculated by dividing SoM by the total number of house or unit dwellings in the area. Total number of units/houses is calculated based on the Australian address database.Matt Djolic, HtAG Analytics
In contrast to SoM, units have a smoother SoM% distribution curve compared to that of houses. This means that ranges for units can be somewhat wider than for houses. However they are still in the same ballpark.
Both units and houses are more likely to exhibit low supply conditions (relative) at SoM% under 0.5% in the current environment as of Q2 2021.
SoM and SoM% reflect relative supply conditions in a property market i.e. council area or suburb. By comparing SoM reported for suburbs within your research scope, you should be able to identify markets with low and high supply based on a predefined range.
You are likely to find better deals in suburbs offering higher SoM/SoM% if you are a buyer. On the other hand, if you are a seller, lower SoM/SoM% are great indicators for little competition in the market from other vendors.
Be cautious of markets with over-extended supply reporting SoM% above 2%. It will probably be challenging finding a property in markets with high competition from other buyers reporting SoM% under 0.25%. This is assuming there is a high enough demand to match the supply.
DO NOT use the Stock on Market metric in isolation. Always cross-validate it with other supply and demand metrics.
Stay tuned for the next article, in which we will explore another supply metric called Inventory Levels.