AFFIRMATION THAT LAND SALES VOLUMES ARE INCREASING OR DECREASING IS UNFORTUNATELY A POST-HOC PROCESS IF YOU ARE RELYING SOLELY ON FINAL SETTLED SALES DATA
While Landgate (the state government’s land information provider) sales data is valuable and informative, there is a considerable lag between when land sales contracts are signed and when they are settled. Given that Landgate only records settled sales, the total number of land sales during the current period may not be recorded by Landgate for up to 18 months after the contract date.
Given this lag, the Institute developed the Urban Development Index (UDI) over a decade ago. The UDI endeavours to provide up-to-date land sales information by surveying around 30 of the largest developers in Western Australia. Each quarter, the UDI records the number of contracts signed for sales of residential lots. The UDI does not, however, endeavour to capture all land sales in the state given that there are many small, private land developers and landholders. It is a representative developer sample that reveals sales trends rather than aggregates.
The quarterly survey captures a varying proportion of overall land sales in Greater Perth as it depends largely on the overall state of the land market. At the bottom and early into a cycle, for example, there are relatively few small scale developments and private land holders subdividing larger blocks. But once demand for land picks up, we see developers share of land sales decline as smaller developers and landholders bring land available for sale.
Furthermore, reselling of vacant land becomes a more prominent feature of the market as sales volumes (and prices) improve – the reselling of vacant lots, for example, increased from around 10 to 12 per cent of all lot sales in 2003/04 to 25 per cent in late 2006 in Perth.
An analysis of the Urban Development Index against settled residential land sales revealed that the Institute’s quarterly survey represents between 65 and 90 per cent of new vacant land sales (i.e. excluding resales) in Greater Perth; averaging 75 per cent over the study period.
As a predictor of total land sales trends, the UDI is very strongly correlated with total land sales in Greater Perth. The correlation coefficient – a statistical measure of the relationship between two data sets – was a very strong +0.92 over the five-year study period.
Meanwhile, for the most up-to-date sales trends, the weekly Land Snapshot available to UDIA members records sales by eight of the largest developers in Greater Perth. It represents, on average, 80 per cent of sales captured by the more comprehensive UDI.
For more information about accessing these reports, contact UDIA WA.