Written by Stefan Kostarelis
The Real Estate Institute of South Australia (REISA) recently released a new report that covers the key measures and trends in residential tenancy and sales transactions in SA.
The report, which is named the “REI Forms Trend March 2017 Quarter”, was published in association with REI Forms Live and BDO.
According to the report, January showed the highest amount of tenancy agreements with 3,118 written. Although February was still relatively strong with just under 3000 agreements, March saw an 8.1% decline to 2,866 agreements.
However, when compared with the December 2016 quarter, the March quarter had 20.4% more tenancy agreements. This is no doubt because many twelve-month tenancies begin in the early months of the calendar year.
For the March quarter, the Adelaide CBD recorded the most agreements with 424 written. Largely rural areas such as Mount Gambier (213), Port Pirie (154) and Port Augusta (132) also had a high number of written agreements.
Excluding the CBD and rural areas, Mawson Lakes (208), Morphett Vale (109), Prospect (108) and North Adelaide (103) were the highest performing suburbs.
The report also examined rent prices across the state. The average rent price declined 8.4% from January ($344) to March ($315), in correlation with the fewer agreements written over those three months. Since rental demand has decreased in that time, it makes sense that prices have been adjusted accordingly.
During the March 2017 quarter, the average cost of rent was $333 per week, a 16% increase on the $287 average during the December 2016 quarter.
The top five suburbs that recorded the highest average weekly rental amount for the March 2017 quarter (with more than ten agreements) were Malvern ($620), Hahndorf ($542), Eastwood ($537), Hyde Park ($520) and Glenelg ($476).
At the other end of the scale, 18 of the bottom 20 results were from rural suburbs.
Similarly to rental agreements, sales agreements trended downwards throughout the March quarter, with 35% of the quarter’s agreements being written in January. March saw the lowest number of agreements with just 1544 (32%) signed.
A large number of sales agreements came from rural areas, with 84% of the top 25 agreements by quantity being written in rural suburbs.
With disruptors such as Purplebricks entering Australia, there has been a lot of talk about flat fee approaches to the real estate market. Judging by this report, the industry is already adapting, with 17.2% of sales contracts written through the March quarter using fixed professional fees.
The report also looked at preferred settlement days and agent estimates compared with vendor prices.
Vendors have slightly changed their expectations for preferred settlement timeframes. The preferred timeframe in January was an average of 39 days that increased to 49 days in March. For the whole quarter, the average was 50 days with variances related to sale prices.
For example, when the price range increased above $650K, the preferred settlement days increased to approximately 60 to 70 days. Below $250K, the preferred settlements days was also slightly higher than average at 55 days.
During the March quarter, the agent’s best estimate equated to 98.9% of the vendor’s acceptable price, showing that agents have a good understanding of the market.
Finally, the report found that the average deposit size was 3.7% for the quarter, which is significantly lower than the typical 5% or 10%. In January, the average deposit size was as high as 8.4%, but it fell below 4% in both February and March.
Once again, sales prices were a key differentiator. The lowest average deposit paid during the quarter was 3.2% in the $550K – $650K price bracket, while the highest was 5.7% in the above $950K bracket.