Where are the property owners headed?

The length of tenure, or a property’s ‘hold period’ is a very under utilised property statistic.

The hold period is a calculation which measures the time period between sales expressed in years. The hold period calculation at a suburb level is expressed as an average across all sales during the last 12 months. On average, across the combined Australian capital cities, the hold period for a house is 7.5 years and 6.5 years for a unit.

The hold period calculation is not widely utilised but is a very valuable tool for property market professionals and investors. As a real estate agent, if you know the average hold period within your area it can help you to target those property owners which are most likely to be selling during the coming years. If you are a mortgage broker or bank and you are aware of the hold period it can assist to indicate the level of equity owners are likely to have in their property and may be a good trigger for them to look at reinvesting some of that equity.

Throughout the capital city markets houses tend to have a longer hold period than units. Melbourne and Sydney have the longest average hold periods for houses and units (9.6 years and 8.0 years and 9.1 years and 7.4 years respectively) whilst Darwin and Adelaide have the shortest average hold period (4.7 years and 4.0 years and 6.6 years and 6.2 years respectively). The cost of housing in Sydney in particular, but also within Melbourne, may be contributing to the longer average hold period, especially when you consider the higher property prices in those cities and the cost of moving.

Meanwhile, the strong and consistent value growth in recent years within Darwin and the relatively more affordable property prices in Adelaide are probably contributing to a greater propensity to sell properties within these cities.

Taxes such as stamp duty on the purchase of houses can also contribute to owners choosing to maintain ownership of properties rather than selling homes more often. This is especially the case within the more expensive areas given that stamp duty is generally based on the purchase price and higher priced properties incur greater stamp duty. As a result owners of more expensive property may look to renovate their property rather than relocating.

Looking throughout the capital cities, Ivanhoe East in Melbourne recorded the longest average hold period of all capital city suburbs at 16.0 years. Over that 16 year period between May 1994 and May 2010 median house prices within Ivanhoe East have increased from $250,000 to $1.25 million. As a property professional with this knowledge at hand you would know that potential sellers could have up to or in excess of $1 million dollars worth of equity in their home.

You would also start to target those owners who have owned their house within Ivanhoe East for 15 years to see if they are interested in selling given that it is getting close to the average length of ownership for that suburb.

At the other end of the spectrum, the capital city suburbs with the shortest average hold period over the last 12 months was Burnside Heights in the Melton region of Melbourne and Berrinba in the Logan council area of Brisbane.

Burnside Heights and Berrinba houses were, on average, owned by the vendors of the last year for just 1.7 years. Both of these suburbs are located a significant distance from the city and are both characterised as being home to new housing development. In areas such as these maintaining relationships is important for property professionals as owners have a greater propensity to sell.

For the most part, the areas which have the longest hold periods are long established areas and are mostly located in inner city areas or in coastal/waterfront areas. Those suburbs with the shortest average hold period tend to be characterised as having a significant amount of new development.

A sound understanding of the hold period and what it means can afford a competitive advantage when looking to target new business.

Tim Lawless is the Director of Property Research at RP Data.