Owners hold onto their homes

Australians are choosing to own their homes for longer with the average time frame between house sales increasing from 6.8 years 10 years ago to 8.6 years in 2011.

The average “hold period” simply calculates the average time frame between residential property sales. The figure is calculated based on the number of years between when an individual property is purchased and consequently sold. During the 12 months to June 2011, the average Australian house was held for 8.6 years and the average unit was held for a lower 7.5 years.

In recent years, there has been a clear trend towards owners holding onto their properties for a longer period of time. Part of this trend is due to the fact that as time progresses our depth of data increases however, we do believe that the longer period of time between sales is a growing phenomenon. Ten years ago, for the average Australian house was being held for just 6.8 years and unit owners were selling after an average of 6.1 years.

Across each capital city the average hold period has trended longer over the past decade. Additionally, in all instances, houses have a longer average hold period compared with units. The data indicates that home owners in Melbourne and Sydney tend to remain in their homes the longest. This is likely to be the result of higher purchase prices of homes and subsequently higher transaction costs which act as a disincentive to move home on a more regular basis.

On the other hand, home owners in Darwin, Adelaide and Hobart tend to transact homes on a more frequent basis. Again this is anticipated to be the result of these markets generally having cheaper property prices and as a result the costs of sale aren’t as high as what a vendor would expect in Sydney or Melbourne.

Looking at the regions in which houses have the longest and shortest average hold period provides some interesting results. In the main, most of the council areas where houses are being held for the longest period are located in Victoria reflective of the fact that that state and the capital city (Melbourne) have the longest average hold period.

Notably, outside of Victoria and New South Wales none of the council areas with the longest hold periods are within the capital city regions.

Monash in south-east Melbourne had the nation’s longest average hold period during the last year at 12.6 years.

Focusing on regions with the shortest average hold period, these council areas were almost exclusively located within Queensland, South Australia and Western Australia. The mining region of Port Hedland in north-west Western Australia had the nation’s shortest average hold period over the past year at just 4.7 years.

Mining regions feature quite heavily in the list of regions with the shortest average hold period and none of those council areas listed are within a capital city. In fact, most of the regions listed aren’t even within a major regional population centre.

Property values have increased in recent years and the costs associated with moving home have also increased. Agent commissions are typically based on a percentage of the purchase price so sellers have to pay more commission if properties sell at higher prices. The price of the next home that they purchase (assuming they are re-purchasing) is often more expensive than the one they have sold so they will not only be taking on a larger debt liability but will also be paying a higher rate of stamp duty. In light of the fact that the costs associated with moving are higher than they have been previously it is reasonable to suggest that the average hold period of a property will continue to increase as the inefficiency of stamp duty and higher home prices act as a disincentive for home owners to move as frequently as they would possibly like to.

Tim Lawless is research director at RP Data.