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Jeremy Sheppard Blog post by Jeremy Sheppard

Why you shouldn’t neglect Stock on Market in you research…

Hi, I’m Jeremy Shepherd. I’m talking about the percentage of Stock on Market. This is one of the indicators we use it at Empower Wealth to help uncover top growth locations for our clients.

Stock on Market is calculated as the percentage of properties that are currently advertised for sale compared to the total number of properties that are in the market. So, let’s say we have a suburb of a 1,000 houses and 10 of those that are currently listed for sale — that would mean the percentage Stock on Market would be 1%. This is, of course, a very important indicator.

It’s the supply side of the supply and demand equation.

Supply and demand is the ultimate dictator of price growth, which works for any commodity or service. It’s a fundamental law of economics. Obviously, we’re after markets where the percentage of stock on market is very low

Our benchmark is around about 1%. So, we look at markets with 1% or less Stock on Market.

The percentage of Stock on Market does suffer from a couple of issues, some anomalies in its calculation.

For example: you can have a circumstance whereby a property is sold off market. It could be that the vendor has privacy concerns — they don’t want people marching through their property every weekend — or they just want the property sold without too much kerfuffle. There are other circumstances that could also cause the percentage Stock or Market to be a little lower than what it really is — and it’s all about off market deals.

Let’s say, there’s a large amount of interest from would-be buyers and the agents are getting all this interest. The real estate agents kept their contacts and a vendor offers a property to them asking them to sell, and the agent can actually just ring up all these people looking to buy, without having to actually list the property for sale.

So, if it’s not listed for sale, the public doesn’t know about it and we can’t calculate it.

These off market deals can affect the price, the calculation of the Stock on Market, so it does have some issues. But it’s a very important indicator, certainly for calculating the supply side of the supply and demand equation.

It’s not the only indicator we look at, obviously because of these issues. We look at a whole host of indicators. If you’re interested in knowing more about the indicators we look at check out our Research page. Feel free to leave a comment below:

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