Property owners in Victoria prefer to keep a property rather than sell it, according to research conducted by RP Data into the average hold period for properties across Australia.
The hold period, or the average length of time a property is held before selling, is an important indicator and can be used to develop greater insight into a particular property market. The hold period is simply determined by the difference in time between when a property is purchased and consequently sold.
Looking at how long a property is owned for provides a good guide for agents as to where potential vendors are and can also help to determine likely equity in a property.
Nationally, over the 12 months to May 2009, the average hold period for houses was 7.5 years and the average hold period for units was 6.6 years.
This means for houses that 7.5 years ago, the median value was recorded at $265,557 and in May this year the median house value was $495,700. Based on this, the average value of those houses sold last year has increased by $230,143 since purchased, at a rate of 8.7% annually.
For units, the national hold period is 6.6 years, which means the median has increased from $279,785 to a current median of $406,587. The average unit vendor during the last year has seen the value of their property increase by a total of $126,802 since they first purchased or by 5.8% annually.
On a state-by-state basis, Victoria had the longest average hold period across sales during the last year at 8.7 years, followed by properties in New South Wales (8.3 years),
ACT (7.5 years), Queensland (6.8 years), Tasmania and Western Australia (both 6.5 years), South Australia (6.2 years) and Northern Territory (4.5 years).
In Victoria, the inner Melbourne suburb of Caulfield claims the nation’s longest average hold period during the last 12 months. Across the 23 house transactions last year, vendors had owned their Caulfield house for an average of 15.8 years which was more than double the national average and more than 7 years longer than the Victorian average.
Throughout each state and territory, the suburbs which recorded the longest average hold period for houses was dominated by capital-city areas.
In New South Wales and Queensland, suburbs with more affordable median house prices tended to have the longer average hold periods, whilst in the remaining states it was generally the more expensive suburbs, which recorded the longest average hold periods.
In the main, those suburbs detailed recorded an average age which was greater than the local average and these suburbs also tended to have a greater than average income level. These also tended to be longer established residential areas rather than newer areas of the relevant cities.
For units, Victoria was the outright winner again recording a hold period of 7.8 years.
New South Wales units followed at 7.1 years, followed by the ACT (6.6 years), Tasmania and Western Australia (both 6.4 years), South Australia (5.9 years), Queensland (5.7 years) and Northern Territory (4.0 years).
The Melbourne suburb of Strathmore had the longest average hold period across sales during the last year, recording an average hold period of 15.4 years across the 26 unit sales during the last year. This result was more than double the national average and more than 7 years greater than the Victorian average.
Like the housing market, the suburbs which have the longest average hold period for units tended to be those which are located in the capital city areas. In all states except New South Wales and Victoria, it tended to be more affordable units that appeared on the list of suburbs with the longest average hold period.
The suburbs detailed showed a prevalence of older than average residents within. Meanwhile, the markets highlighted tended not to be the better-established inner city unit markets, rather, they were defined markets, as being more suburban locations.
These results highlight those suburbs with the longest average hold period but this calculation has many uses and is simple to calculate. From this simple calculation, real estate agents can target those people most likely to be looking to sell their property while vendors can use this measurement along with a valuation to determine the likely level of equity available in their home.
For those who have owned their home for quite awhile and never looked into the statistics, they will be surprised to see just how much equity has built up in a property and how quickly it has grown in recent years.
Cameron Kusher is a senior research analyst at RP Data.
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