We often hear things such as “Market Volatility” and how it can effect the sale of your home, but what exactly does this mean? In a traditional context, market volatility is the rate at which investment market prices move up or down. These changes could be a result of interest rate changes, supply and demand, season and even global economies.
If your home is a typical two bedroom apartment that is one of many in a block or street of blocks of apartments that are all very similar, the price can be easily predicted by recent sales in the building or street. If you try to hold out for a higher price, chances are your purchaser will simply find another apartment in the same block or one down the road.
Similarly, if you are selling a three bedroom house in a row of houses of similar age and construction and size block – such as a housing estate – then a sales price is fairly easy for a professional or anyone who has been tracking sales in the area to predict. This is because these properties are not subject to great variation in prices achieved or in other words they don’t experience great market volatility.
Conversely, the prices of Sydney properties that are highly market volatile can’t be so easily predicted. This predictability is not in itself the cause of the volatility but a result of the way the market responds to different types of properties.
Higher market volatility is generally to be seen in the sale prices of houses that are more unusual – perhaps unusually large or small or cute or of unusual design or owned by a celebrity or have a special view or a private jetty – such houses are subject to much greater market volatility in that it is much harder for buyers to find something similar once they have set their heart on a particular property. In such cases, it is not unusual for demand to drive prices higher than would be normally anticipated if there are several interested parties – or conversely prices to drop at time of low demand – in other words the price is volatile.
Properties with high market volatility tend to do well at auction where bidders are competing for something that – once they miss out – will be gone forever, while those with a lower market volatility, that can be easily replaced often don’t always create the level of competition necessary for a successful auction except when there is a shortage of property on the market.
If you are searching for an investment property in Sydney or investing in general, you must always analyse the risk of the investment and weigh it against the potential returns. If you are looking for a home with high market volatility for potential future auction, put yourself in the shoes of your buyers and ask “what would I want?”. You can always ask friends, family, co-workers for their opinion and you can always trust the opinions of our highly-trained sales people and business development officer.
