Graphs and Stuff

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Sydney Property Prices by Settlement Length

Sydney Property Price by Settlement Length (in Days)

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As we can see, longer settlement periods are clearly associate with higher prices. The "standard" settlement period of around 6 weeks (or 42 days - I know my multiplication tables!) has sales values up around the current median of roughly $1m. But the longer settlements are quite a bit higher.

A fair question might be just how prevalent the different settlement periods are.

Sydney Number of Property Sales by Settlement Length (in Days)

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Note that there hasn't been a dramatic drop in sales in 2021. It's just that it's only half-way through, so the number of sales is lower.

As we can see, the longer settlements are reasonably prevalent.

A possible dynamic at play here is that longer settlements are preferred by upgraders on the purchase of their new, more expensive home to allow them time to complete the sale of their cheaper old home. This might lead to a divergence in prices between the shorter and longer categories. Another aspect is that very long settlement periods are a sign of off the plan purchases. I'm not sure why that would lead to higher prices, however. Apartments tend to be cheaper than houses, and in a rising market, you would expect prices from, say, 2 years prior to be lower than current. However, it's possible that there are more off the plan sales in more desirable areas.

Whatever the reason, it's an interesting wrinkle.

It's worth mentioning the shorter settlement lengths. You would think that they are indicative of non arm's length transfers. Which would be fine, except that the data this is based on - from Valuer General of NSW - has a flag for non arm's length transfers, and these charts filter them out. There aren't very many really short length sales, but one wonders whether these have an impact on the price indices that are published. Indices tend to eliminate extreme outliers, but one wonders whether there are enough of the short settlement data points to slip through the "sanity checks" and therefore drag the indices down. It probably still doesn't matter for relative indices, because as long as the effect is consistent through time, the relative growth ought to be accurate. The short settlement prices in the past dragged town the value then, and continue to drag down the value today, leading to the correct percentage growth. But it makes median prices potentially less reliable and under-estimated.