For edition four of our key drivers of the property market series, we’re taking a more in-depth look at how supply and demand affect the property market.

Read Edition 1, Edition 2 and Edition 3 of this series

Defining supply and demand

Supply and demand are based around the number of available properties and the number of interested buyers. When there are more properties than buyers, you have a high supply but low demand market. With fewer properties than buyers, it’s a high demand and low supply market. Supply is influenced both by new constructions as well as existing properties sold. The higher demand there is, the more competition you can expect for the desired property and the higher the property value is likely to be. Vice versa, the more supply or lower demand there is, the lower the property value may become.

Understanding the impacts of COVID-19

In light of COVID-19’s economic impacts, some property experts predict an increase in the downsizing trend and demand for lower-cost living[1]. If correct, this trend would imply a high demand for apartments and units as opposed to more expensive family homes. However, COVID-19 has also seen a decline in new construction. Building approvals dropped for all property types throughout May[2] , which may mean there is a lower supply of housing in the future. These factors combined suggest a potential for high demand but low supply of high-density living arrangements in the future.

Using this information to your advantage

When it comes to supply and demand, it’s important to make judgements in combination with the other drivers we’ve discussed so far. By checking demographics data, you may be able to predict the types of properties that are in demand. Reviewing employment data can tell you who, or how many, can afford to buy. And we spoke about this in our previous blog about employment – don’t forget to assess government support programs, which can increase affordability and open up the market to first home buyers.

Where to find relevant data

There is no data directly tracking supply and demand, but using other data can help. Employment data, building and construction data, as well as demographics data, can be useful in mapping the supply and demand trends over time. You can also seek out historical real estate data to understand when supply or demand was at a peak and cross-reference with other economic conditions at that time for a full picture.

New projects always on the horizon with Norm Carey

For over 30 years, Norm Carey has been developing luxury properties across Australia. Keeping a keen eye on the property market, we’re always preparing new projects with a focus on high returns for our investors. Learn more property and investment tips on our blog or contact our team for information on current and upcoming projects.

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[1] https://www.watoday.com.au/national/western-australia/perth-property-post-covid-how-recent-pain-could-prove-our-gain-20200505-p54q28.html

[2] https://www.abc.net.au/news/2020-07-01/house-price-slide-accelerates-as-coronavirus-pandemic-drags-on/12409166