29 May Large urban areas ripe for picking – Jeremy Sheppard
We discover the 20 largest significant urban areas around Australia with Location Score. This App has the ability to look back and track where property markets have been to work out where they are going. Jeremy Sheppard from Location Score explains how it works.
Kevin: Towards the bottom of the homepage on Real Estate Talk, you’re going to notice a badge there for a product called Location Score. I want to dig a little bit deeper into this because there was a really interesting release that they put out this week that had a look at the 20 largest significant urban areas around Australia. Some great lessons coming from this and now that Location Score has the ability to look back a little bit and track where the property markets are going, we’re getting some really good data.
Joining me to talk about this is Jeremy Sheppard, from Location Score, LocationScore.com.au and as I said, use the button on the homepage at RET to tell you a little bit more about it.
Jeremy, tell me about Location Score. How do you write these areas? What sort of data do you use?
Jeremy: The whole idea about it is supply and demand. We’re trying to score supply and demand, so we’re looking at things like auction clearance rates, vacancy rates, percentage of stock on market. That’s obviously a very good indicator of supply.
We munge all of these statistics together into a single score out of 100, because that’s just easier to digest. The higher the score is, the more demand exceeds supply, so it’s that simple really.
Kevin: Let’s have a look at one of the hot markets recognized around Australia, and that is the Sydney market. What have you noticed there, and what has Location Score picked up?
Jeremy: As the report shows, over the last few years, the Location Score has been steadily declining in Sydney. It was at a peak somewhere in middle of 2015,and since then, it’s just been gradually coming back. And you’d expect that; sky-high prices subdue demand like nothing else.
It’s come back down from about 73 to 60, which is quite significant, but that was over about a three-year period. But that obviously reflects where the market is right now. We’re seeing very low growth, if any at all, and that’s because the demand has been balanced with supply.
Kevin: Speaking of balance, what would you score a balanced market at?
Jeremy: The theoretical balance point is a Location Score of 50 because it’s scored out of 100. But what we’ve found historically is it’s probably around about 55. About 55 seems to be where the figures lie for a market that’s in balance.
An example of that might be Brisbane at the moment. It has a Location Score of 56, so that’s about balanced. And of course, Sydney is still just a little bit higher than that, so you’d still expect it to have some sort of growth. But of course, it’s come down a long way.
Kevin: What are some of the high achievers that you can nominate for us?
Jeremy: Actually, one interesting one is Melbourne. Despite the fact that we’re hearing that there’s been little growth, I’m just wondering whether that’s seasonal – perhaps, Christmas, New Year’s, and Easter, and so on – because we’re seeing that the Location Score is still reasonably high. It has come back a bit from last year where it was quite high, around about 68. But it’s still tracking about 65, and to me, that means there’s still some growth left in the Melbourne market. I don’t think that this year, it’s going to be such a flat year for Melbourne.
But the standout markets, I think, are Geelong. Geelong had a very high Location Score. Let me just flick through the report and find out where that was. I think it had the second highest Location Score. This is data finishing March 2018. It had a location score of 66, which is quite healthy – very healthy – and that’s a natural response of the Melbourne growth, that it’s starting to ripple out towards the nearest regional markets. Of course, Geelong being within a stone’s throw of Melbourne.
Kevin: We’ve heard some horror stories about Perth. What are you noticing there? What’s it telling you?
Jeremy: It’s still no good news for Perth, but it appears that it has bottomed. The Location Score for Perth has been pretty much constant over the last two years. It’s been tracking around 50, 52, 51. There’s a little bit of volatility there, but the good news is that it isn’t going any further south.
It’s decline probably finished towards the middle of 2016, so since then, it’s just been smooth sailing. But that doesn’t mean it’s about to enter its growth phase. It could just sit on the bottom there for who knows how long?
Kevin: I was going to ask you at what point do you say maybe the Perth market has turned around. Is that over 55?
Jeremy: I personally would like to see it go above 60 before I’d show any interest in it, in fact, 62. To me, 55 is still just balanced; it’s business as usual. Most markets are in a state of balance. There’s this tug of war between supply and demand. Every market wants to be in balance, and so the vast majority of them are around that 50 to 55, mid-50s. So, it doesn’t get our interest unless it’s getting up above 62. That’s when it triggers some attention from us.
Kevin: I guess we have to be pretty careful here too, don’t we? We’re talking in general terms here about capital cities, but even within capital cities there are markets within markets.
Jeremy: Yes. Actually, an interesting point there. I’ve noticed there are a couple of markets in Perth that have caught my eye. And this is usually the case. When you see a boom starting off, it’s usually affluent areas where the property prices are quite expensive. People are looking at them and thinking “That’s really good value for money. I know we’re in the middle of a flat period.” And that’s what triggers the start of the boom, and then it ripples outwards. Then you have this flight to affordable locations towards the end of the boom.
We’ve noticed just a couple of those exclusive sort of areas in Perth, their individual Location Scores have just started to climb up into the interesting range. It’s no signal yet, but like you said, there are markets within markets, and so people in Perth probably have a few opportunities coming their way soon.
Kevin: Go to Real Estate Talk. Look for that button. That’ll take you to LocationScore.com.au. It will tell you a lot more detail. You can dig into that. You can subscribe to it, and then you can go and have a look at any suburb you like and get all kinds of information we’ve been talking to Jeremy about today.
You can get a bit more information, too, by going to RET, Real Estate Talk, and putting in “Aussie swingers reveal future rises,” and that’ll take you straight to the article that actually gives you a lot more detail, a lot more suburbs, and actually looks at the markets of Sydney, Melbourne, Brisbane, Perth, Adelaide, Gold Coast, Newcastle, Canberra, Sunshine Coast, Central Coast, Geelong, Wollongong, and Hobart, to give you a really good insight.
Jeremy Sheppard has been my guest, and we’re talking about a website called LocationScore.com.au. Jeremy, thanks for your time.
Jeremy: Thanks very much, Kevin.