Why people are holding on: Insights into property hold periods

Analysis of PropTrack data shows that in many suburbs around the country average hold periods are more than double the national average of about 10.5 years.

Gentrification, amenity, lifestyle and changing property values have all likely influenced how long owners are holding on to their homes.

There are many suburbs where homeowners buy and hold for extremely lengthy periods, and the most tightly held suburbs tend to be those that have wide reaching appeal.

It is typically life events such as marriage, childbirth, or retirement that alters housing needs, prompting homeowners to sell.

As a result, regions desired by a wider demographic, from young families to retirees, that can withstand different lifecycles and accommodate a wider range of housing needs tend to have longer hold periods.

These tightly held pockets tend to be located in the middle and outer suburbs of our capital cities and are typically considered good neighbourhoods.

While there is no one factor that draws the most tightly held pockets together, most of the suburbs with the longest average hold periods tend to have a high level of amenity, a good sense of community, and some are near water or the ocean, offering perennially popular lifestyle attributes.

Others are in locales with good schools, parks, and shops, and benefit from being well serviced by infrastructure networks, allowing easy access to the CBD and other parts of the city.

Many of the most tightly held suburbs in each capital city have one or all these qualities.

These suburbs are generally characterised as great places to live and have a high degree of desirability and convenience for residents. Typically, these suburbs also tend to be well established with many people choosing to live in these pockets long term.

Units typically turn over more quickly than houses and are held for shorter periods. Houses tend to attract a broader demographic of buyers, including families and those looking for more space, and allow more flexibility for enhancements which increases long term appeal.

It's possible that many of these suburbs are where young families settled and have chosen not to downsize, even after their children have moved out and they become empty nesters.

This may also be a reflection of inefficient tax and transfer barriers that disincentivise rightsizing. Empty nest households probably don’t need as much space as they have, yet many keep it because downsizing is unattractive due to the various barriers and costs to downsizing, such as stamp duty.

Though there are many different factors that influence decisions to buy and sell property, analysis of PropTrack data shows our more expensive capitals tend to have longer average hold periods.

This trend persists when we drill down to smaller regions, with the most expensive areas tending to exhibit longer average hold periods.

Suburbs with the longest hold times also tend to be found in Sydney, which accounts for the majority of the most tightly held suburbs nationally.

Sydney also has the longest average hold periods for both houses and units out of the capital cities, with houses held for an average of just over 13 years and units held for just under 10 years.

The high burden of stamp duty in Sydney, the most expensive capital, may also discourage turnover meaning homeowners buy and sell less often, contributing to longer average hold periods.

Sydney's status as a global city with robust economic fundamentals and international appeal may also add to its long-standing desirability.

Rising property prices can prompt earlier sales

Over the past five years many parts of the country have experienced extraordinary growth in property prices, with Brisbane, Adelaide and Perth leading growth.

Brisbane has been the top performing market over the past five years, with house prices increasing by 81%, and unit prices rising by 55%.

This significant value uplift may have prompted some homeowners to sell and upgrade more quickly, and as a result average hold periods in Brisbane have declined in the past five years.

Lower interest rates in this period have also encouraged buying and refinancing, with some finding it easier to upgrade or downsize due to more affordable borrowing costs.

Generally, average hold times have fallen in the capital cities that have had the biggest increase in prices in the past five years.

This rings true when we drill down to smaller regions. The areas with the biggest falls in average hold periods are areas where prices have outperformed – a pattern that's consistent across the country.

Areas that have seen the largest falls in average hold periods for houses include places like Adelaide’s central hills region, the Logan-Beaudesert and Ipswich regions in Brisbane’s west, as well as Perth’s inner, northeast suburbs and Mandurah regions.?These areas have also all experienced strong price growth in the past five years – with house prices up 50% or more, and nearly 80% in Ipswich.

Areas with the fastest turnover of properties also tend to be in newly established regions. Shorter holding periods in newly developed areas may reflect the age of housing stock, but also the type of buyers an area attracts.

In regions favoured by first-home buyers, turnover can be higher given many don’t stay in their first home forever.

However, if we expand the timeframe and look back at the past decade, average hold periods in every capital city region have increased since 2014.

Stamp duty is also likely to play a part. Looking at trends over the past 10 years, Sydney and Melbourne regions where higher stamp duties deter turnover have generally had the biggest increase in hold periods. In more affordable regions with more new development, like Ipswich, hold periods haven’t increased as much in the past decade.

Over the long-term property prices have risen substantially, with many homeowners incentivised to hold for longer periods with the expectation of continued capital growth. Those that don’t have to sell are deterred from doing so as a result of long-term price appreciation trends.

By Eleanor Creagh

Want updates direct to your inbox?

Subscribe to the PropTrack Economist Newsletter for weekly insights

PropTrack is Australia’s most reliable choice for property data, market insights and valuations solutions – utilising the latest artificial intelligence, machine learning techniques and software capabilities to power realestate.com.au and our customers. As part of our commitment to changing the way the world experiences property, PropTrack is helping organisations use transformative property data, develop new property experiences and automate valuations, enabling new solutions and services for the modern consumer. Join the millions of Australians who already use REA Group apps every month and transform your property experience. proptrack.com.au

?