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Nerd alert! Property nerds, the home for data-driven property investors, where we uncover Australia's hot and cold markets, latest headlines and trends. Hello everyone, this is Arjun here, your co-host of the Property Nerds podcast, and I'm joined by Kent. Hi Arjun. Kent, I've got some pretty exciting news to go through today with regards to some data on some of the markets that we're seeing and some interesting findings.
But before I do go into that, how about we just give listeners a bit of a refresh on who we are? My name's Arjun, and I also run alongside the Property Nerds, a buyer's agency by the name of InvestorKit, helping residential and commercial property investors grow their portfolio. We've got Kent here, the co-host of the Property Nerds. Do you want to give everyone a bit about yourself? Yeah, I'm running a business called Suburb Trends.
I do lots of things with data when it comes to property, and I've just launched a new map. So if anyone wants to have a look, go and have a look at my heat map. There's 11 different heat maps to describe the property market. And heat maps, data, looking at all that, we love that, don't we, Kent? Hence the name.
Yeah, well, I think for me, adding the data visualizations of things like maps gives you insights that you don't normally get by looking at charts or spreadsheets alone. So I love the maps. And I think the other key learning for me is I'm still uncovering stuff. Every week, there's something I say, hey, Arjun, I've just seen this, and wow, I didn't realize this before. And it seems like every time we do a podcast, I've got one of these little anecdotal stories where I can say, hey, I've just learned something, and I wanted to cover that this podcast.
And we've been looking at inventory levels. Inventory levels. And for those listening in, it's probably one of our favorite metrics to go over. And the importance of it is going to be displayed more than ever in this session today. And I guess just to recap what inventory is, Kent, do you want to shout out on inventory?
Yeah, so it's a hypothetical metric that says if no other property was listed for sale at this particular point in time, how long would it take for every available listing today to clear for nothing to be available for sale? So typically what we do is we measure the average number of listings, and we then compare that to the average monthly sales and express that as a ratio, i. e. months of stock. And typically what we've done is we've categorized it, anything below three is a pretty strong market.
Then we go up three to five, five to seven, seven to nine, and over nine. Over nine being a pretty cool or cold market. And across the board in Australia at the moment, most markets are hot. And probably the second thing I wanted to cover off here is what do we define as a market? And I don't like to look at a suburb in most cases.
I don't like to define a suburb as a market. It's just too small. There's not enough sales and the metrics misbehave. So we aggregate them by an area called a statistical area three. So the Australian Bureau of Statistics, I'll just call it an ABS.
The ABS have aggregated and created something called a statistical area three. In some cases, it aligns pretty neatly to your local government areas, but in other cases, it's subdivided. And Brisbane's a great example. We like to talk about that. It's a monster size LGA, so is the Gold Coast.
So by then going to the SA3s, you're carving the market up into a really nice size where the numbers make sense. And why we keep talking about inventory and the SA3 is because, like you said, Kent, it's actually one of the few measures or only measures that puts together demand and supply. And we always talk about, yeah, you know, property is a demand and supply thing, but very rarely do people piece that together. We talk listings or we talk how fast something sold or the sales occurring. So why we continue to rave on inventory is because it has that impact of showing you both the level of listings combined with sales.
It then has a very clear effect on the days on market, you know, how fast something sells and the speed or trend change in it. And as we know, we've seen how it can impact prices. I was talking to you earlier today and we were talking about the impact on prices specifically. And don't you just love it when the picture we're talking about starts to come together with the low inventory markets and seeing that price growth that occurs following? It does.
So obviously we've seen a few scenarios where there's a number of markets that have been at a very, very low inventory level for a number of months now. So it might be, you know, one to two or one and a half. But generally what I'm finding is there's a whole category of markets that once they get below three months of inventory, you don't really worry if it's jumping up or down or up or down a little bit month to month to month. So typically what I've found is that the longer it stays below three months, how many months it stays below that three month of inventory level is the big determinant in price rise. So that's the big driver.
So how long is it a strong seller's market is the thing that drives the price growth. And what was really interesting to see, so I've got this table up in front of me. We categorize the markets from a under three, three to 4. 99 months of inventory, five to 6. 99, seven to 8.
999 and above, like you pointed out earlier. And how we used to label this in the past, Kent, is the under three was a high pressure market. The three to 4. 9 was modest pressure and the five to 6. 9 was balanced.
And sort of when you got over that seven and nine, we saw that kind of little bit more of that buyer's market. But what was really great to see was that growth that we saw in the under three, the under three months of inventory that, you know, over the last 12 months, their price change, a whopping 18% average of price growth in under three months. Isn't that huge? It is. It's quite significant.
And what it's also done is it's reinforced these categories because the next one down is obviously the three to five months. And that was 14% growth. So anyone, you know, looking at these metrics, the importance of it is risk reduction, right? Because if you are buying in areas of pressure, these metrics are showing us that price growth can happen even more so in areas of low inventory, hence the higher pressure. But what was interesting was what we learned about the other side of the inventory.
Yeah. What I expected going in was that the high inventory level markets, just taking a snapshot of where is the inventory level today, I was expecting those to show up a lot more zero or potentially negative growth. And what I found was that the nine and above still had growth. On average, it had a 4% growth. And when you zoom out and try and find out, well, what's going on here?
The key was they were trending down. So they might have been nine months or more of inventory today, but what were they six months ago? What were they 12 months ago? And what I found was that it was a whole different relationship with the data saying if the inventory level was trending down, even though they still might be classified as a buyer's market or a strong buyer's market today, just by virtue of that trending down is having a positive upward impact on prices. See, that's such a good call out because I was with you in the same boat thinking, hey, higher inventory equals negative results.
And what we found was that nine and above still had 4% of growth over the last 12, seven to 8. 99 still had 8%. Now, how much do we attribute this to what's happening now on a national landscape? Because looking at Australia, I was having a look at some of our SA3 regions, and I found that only 4. 2% of all of Australia's SA3 regions were declining over the last 12 months, which is a very small number.
So how much do we think we put it down to the times that we're in with this national boom that's underway? I'll classify them. I've got them analyzed and grouped by 20% or more, 10 to 20%. This is in terms of median price growth over the last 12 months by SA3. And then I've got the 5 to 10% and then the rest.
And 60 markets were 20% or more, so very, very high growth. The bulk of them sat between 10% and 20%. There's 146 markets. Now, what we are talking about here is housing. We're not talking about units at the moment.
And 71 increased between 5% and 10%. So I narrowed that bucket up. Only 10 that I had identified had fallen. Most of those were outback or rural locations and a handful of anomaly markets where they're heterogeneous, they're oddballs, and they might be near the city, but there's a lot of different stock out there. And this time a year ago, you might have had a flurry of developer sales, very high-priced properties, and then suddenly you don't.
Is that market falling? Probably not. So it's just a case it's an oddball and very hard to measure. And what I found, Ken, is that whilst we're in this national property boom, it also shows that by the classification of inventory and how clearly we could see the 18% of growth in under 3 and 14 and 3 to 5 and the in a particular suburb, jump onto thepropertynerds. com.
au. On our homepage, we've got a free market conditions index report. And so Kent and I have brainstormed the trending inventory changes, days on market, the typical yield in a suburb, the vacancy rate, and how they come together to create what I feel are the most important pieces of data to have a performing investment property. It comes down to, is there a strong relative demand and supply? Are places selling faster?
What typical return you're going to get on your investment? And is it easy to find a tenant? And we answer those four questions on any of the suburbs in the country where you can search it in this index report for free. It's interactive. You can have a play around.
And again, just to grab a copy of that, jump onto thepropertynerds. com. au. It is on our homepage and you can get that for free. Kent, with regards to the inventory and the changes we've seen, I think it's worth also me throwing out some notable mentions to a few other pockets across the country.
Tassie just finds a way to keep on going. It's remarkable because just earlier today, we were talking about cycles and Tasmania is a perfect example that you can almost throw market cycles out the window. Parts of Hobart's Northwest has had inventory at 1. 77 and the last 12 months price growth of 11. 1% in that SA3.
Bernie Overstone, so 2. 17 months of inventory and had 12. 9% of capital growth over the last 12 months as an SA3. So Tassie, you continue to shine. You continue to show some strength in some of the markets, but we also found a bit of a data anomaly on the flip side of Tassie where we looked at some parts of Hobart's Northeast versus the Northwest.
And we found that even though it had low inventory, it didn't quite take off as much from its price change, did it? And that's one of those anomaly markets. I think we need to zoom out and understand that by looking at what's selling and what sold a while ago, sometimes they don't make sense. And I'd put the Northeast in that category. And this makes it so important to go, look, whilst I've now got my data, if you've been in our index report, you can go in and go, okay, I feel good about a few suburbs, but let me start checking some of the properties.
How much did this sell for a few years ago? How much is it reselling for now? And that change starting to occur is where you connect the dots. And this is what we call combining the human touch with our data. And I think if you look at the data hub on the Property Nerds site, we've got the price segmentations for each suburb there.
So if you enter in and do a quick search on the region and then look at the price segments, that's a great way to understand if the suburb is going to behave and if the metrics are going to behave through time. Now, to give some love to a few more regions here, just a quick shout out, we've got the Mornington Peninsula, which again, phenomenal sea change market amongst all the lockdowns Victoria has gone through. It still has an inventory of 1. 81 months. And over the last 12 months, we've seen 11.
8% median price growth for the SA3. Other pockets going across the country, but doing a bit of a tour now, aren't we Kent? Noosa, Noosa, Noosa. Noosa's been strong for a long time, but I mean, I go down to Frankston, you know, the Mornington Peninsula and everything south of Frankston, it's just been so strong for the whole year. Huge.
I mean, the vacancy rates have been another success story for that market, but you know, Noosa here, 2. 49 months of inventory, 13. 9% of last 12 month growth. If we take a tour down to Brizzy, the Hills District, you know, the Fernies, the Oranas, you know, the Inoguras, you know, 1. 84 months of inventory up 11.
5%. And if I just give a last couple of shout outs, we had the Sunshine Coast, Budram, 2. 08 months of inventory and 8. 3% of growth. So it's really all over.
Even if you go over to parts of Adelaide, you've got close to 10% growth, but you know, low inventory. So I feel really good about this session, Kent, because we've shared two learnings. One is the sub three months of inventory and how strong price growth can be. And then number two is when inventory trends, we can still see that growth occur, although it may be at a high level, that trending down can help people get that early shoot of growth. Yeah, absolutely.
And I think the key is though, once you get below that three or four month mark, don't worry too much about is it still trending up or down, wait till it moves well and truly outside of that bracket. Because, you know, a lot of these markets are fairly thinly traded and there's not a lot of listings in a lot of these markets. So we are going to see some volatility in the months of inventory based on the fact that there's not a lot of stuff to buy. Kent, this trend here is something very important because it's making a big difference on something you and I talked about, and this is price estimation tools. Yeah.
Because buyers are out there, you know, perhaps don't have all the time in the day to do all the comparable research and they're using, you know, all the different tools that exist for automated valuations, trying to figure out where we should land, how we should go for this. And the disparity in today's market is the biggest I've seen. Constantly, you know, seeing properties in Coffs Harbour as an example, just the other day I was looking at evaluations of the low to mid sixes for some places and almost all of them were selling in the sevens. What do we find is going on here, this big disconnect? Yeah, there's certainly a lag.
I use my own property and the property next door and certainly a lot of the automated valuation models, I'll just call them AVMs, are lagging, but they're lagging by a large margin. And I've never seen it lagging like this. So they're not keeping up with the indexation. Now let's just talk about how some of them work. Not all of them because I don't know what's behind the covers, but typically the way they would work is, you know, the first option would be, is there a last sale for this property in the last five or so years?
They'll just index that. They'll just take what it sold for and index it forward. So obviously if your index is lagging and not keeping up, it could easily be 10% out. So that's probably the first one. That's the most easy model.
But then you've got the other model that would typically triangulate how a valuer would work and pulling comparable sales. Now, if it's pulling in comparable sales that are three months or older and not indexing them accordingly and not keeping up, then again, it will be 10% or more out based on some of the market movements we're seeing today if the index is not up to date or accurate. And first home buyers, we're feeling for you here because with these changes that are occurring and the tools that you talk about, Ken, and the indexation that's just not catching up, I think more than ever, we've really got to either dig extremely deep into the markets or work with professionals. And the key here is that that last one to three month comparable sales has been the most important piece of finding a property today because anything beyond three months, the data's changed too quickly. Yeah.
And look, I think the Americans do this rather well. They call it a grid adjustment. So their appraisers do a couple of things. They will make an adjustment based on an index movement on a comparable sale. And that's the norm.
So they'll adjust it. The second thing they'll do is a size-based adjustment as part of this grid adjustment. So if it's a one bedroom large or a one bedroom smaller, there will be a coefficient-based adjustment. So in the end, you end up with a price of a comparable sale that is adjusted. Now, it's the same way as the automated valuation models work.
But the downfall of the way appraisals are done, whether they be a comparative market analysis done by an agent or a valuer pulling in comps, if they're not making those adjustments, you will find the problems that we're seeing today, which is underquoting, underpricing, missing the mark. And I don't think that there's any conspiracy here to underquote for many, many cases, some maybe. But I think by and large, if the market's rapidly moving like this, you need to make the adjustment. You even need to maybe get ahead of the pack and do some forecasting to say, hey, this property is listed now. What's it going to sell for?
What's it likely to sell for? This property is just settled. By the time all that data flows through three months later, it could be a few percent higher. So you need to be indexing in these high growth markets that are very, very low inventory, very high upward pressure and price. You probably need to be indexing within weeks, not months.
And we're not talking small gains here because with only 4. 2% of SA3s declining, there's a chance that when we talk about the ranges of 2. 5% equaling a 25 plus percent growth, we're seeing anywhere between 1% to 3% of growth in a month. Yes.
