The number of home sales moved upwards sharply in February, increasing from just 23,047 sales in January up to 32,090 in February. The upwards movement is partly seasonal, with the January sales volumes typically lower due to the time of year. The severe weather events recorded during January would have also contributed to a slower than normal property market in January.
Despite the improvement over the month, the modeled February results continue to reflect fairly subdued buying activity. The average monthly number of sales during 2010 was 33,980, so the February result is about 5.6% lower than that average.
Over a longer benchmark period, the last five years, the monthly average volume of sales is a higher 39,170 sales. Based on this benchmark the current level of market activity is about 18.1% below average.
In all likelihood we will see volumes improve slightly in March; the historic trend has generally been that March sees an improvement in sales volumes over February. Over the 2011 calendar year, we are likely to be looking at another sedate year for property sales. Over the 2010 calendar year we are estimating there were about 407,780 home sales which is the lowest annual transaction count since the 12 months ending August 1997.
The low volume of sales has an obvious affect on industry players. Real estate agents are seeing less commission, the legal industry are undertaking less conveyancing, banks and mortgage brokers are writing fewer loans. Peripheral industries such as removalists and building and pest inspectors would also be feeling the pinch.
What is often less obvious is the multiplier effect the slowdown in property sales has. Most people who buy a home also make significant purchases of new retail goods such as furniture, whitegoods, appliances, and household maintenance items. It’s a reasonable assumption to make that the soft retail sales we are seeing of late are partially related to the slowdown in home sales (both of which are of course related to shaky consumer confidence as well).
Another sector that is feeling the pain of the housing slow down is Government. Property related taxes are the biggest cash cow for state and local governments, accounting for more than 48% of total tax revenue. Stamp duties comprise just under 40% of this taxation revenue. With budget season just around the corner it will be interesting to see how the State Governments are factoring in the market slowdown when the forecast their stamp duty income.