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Why 'spring selling season' is just a real estate gimmick.

 

Danika Wright, University of Sydney

In the next couple of weeks you’ll start to see all the signs of the change of season. Like many Sydneysiders, I’m looking forward to the longer hours of sunshine and flowers blossoming.

Inevitably, and unfortunately, we’re about to see an increase in property spruikers declaring “The main selling season is here!” (2012) “The market is poised for a bumper spring!” (2013), “There’ll be a strong surge in the traditional spring selling season!” (2014).

The chart below shows why:

Average ABS House Price Index Return by Season

The thing is, though, it’s just a marketing gimmick.

Yes, the house price index appears to increase a lot more, on average, in spring. But so does the sales volume. Why would people knowingly jump into the housing market at the seasonal peak?

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It couldn’t just be that these property buyers don’t know that this is the annual peak. For our relative size, the number of inquiries, studies and urban policy research should mean Australians are among the most informed in the world when it comes to real estate markets.

In a 2009 research article I explore this phenomenon (available on SSRN) and show that the “spring bounce” is an artefact of inadequate statistical modelling.

Many house price indices are limited by the availability of data, and rely on median prices to get a sense for what’s going on across the market. However, the change in the observed median sales price can have more to do with the types of properties that are selling from period to period than the actual market movement.

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The underlying reality is that nicer properties sell through spring: typically, larger, well-located, ready-to-sell properties. And, unsurprisingly, these nicer properties tend to sell for more. Why is this the case? In many situations it is because of the education and work calendar - families relocating (resulting in buying and selling houses) will more often than not do so over the summer break. Given property settlement times, this means looking for a new house through spring.

So what advice can we take from this? For those needing to move for the very reason outlined above and braving an upcoming auction, try to avoid FOMO (“fear-of-missing-out”), for another property will come on to the market soon. If you don’t need to buy now, the data would suggest you should wait until summer when many are away on vacation, and pick up a spring-listed property that remains unsold - hopefully for a discount!

Speaking of nicer properties, take a look at Cate Blanchett's Sydney home, which has just gone on the market:

 

Danika Wright is Lecturer in Finance at University of Sydney

This article was originally published on The Conversation. Read the original article.

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