SYDNEY, Sept 25 (Reuters) - For most Australian homeowners, the cost of the country's sharpest housing downturn in years has been the modest fall in property values since interest rates began rising in February.
But while prices have dipped only slightly, home sales have fallen sharply. Reuters set out to measure the impact on the businesses that depend on housing turnover.
Those businesses span a vast ecosystem built during Australia's quarter-century property boom. Real estate agents, conveyancers,
auctioneers, property listing sites, furniture stagers and building inspectors largely earn revenue when homes change hands. Removalists, painters, landscapers, renovators and furniture retailers are also exposed to sales activity, though they make money elsewhere too.
To estimate the economic impact, Reuters calculated the commercial spending typically generated when an Australian sells a home, buys another and moves.
The analysis covered costs from agent commissions and listing preparations through settlement, moving expenses and purchases of furniture and appliances. Low and high estimates of individual goods were used to derive an impact range.
State governments were excluded, despite collecting large stamp-duty revenues and seeing their revenue hit by the slowdown, because they are not commercial entities. Banks were also excluded because most housing-related earnings come from mortgage repayments rather than transaction volumes.
The analysis was based on Australia's median home price of A$1.11 million ($790,000) and the most common dwelling type, a three-bedroom detached house. For each good or service, Reuters used a mainstream advertised price range rather than extreme outliers. Agent commissions, for example, were assumed at the common 2% to 3% range.
A new couch might cost anywhere from A$20 on Marketplace to A$60,000 from an exclusive boutique. Instead, we used the cheapest widely available option (A$219 from Kogan.com.au) and the priciest mainstream offering (A$8,796 from King Furniture), applying the same methodology across all items.
Each item was then weighted by the likelihood of the expense occurring. Costs nearly universal to a transaction, such as agent commissions and conveyancing settled on software platform PEXA, received a 100% weighting.
Less common expenses received lower weightings. For example, painting a three-bedroom home before sale typically costs A$4,500 to A$10,000, but a 2023 Houzz survey found only a quarter of sellers do so. Pre-sale painting was therefore weighted at 25%.
Based on feedback from economists, Reuters also adjusted for the roughly 60-40 split between owner-occupiers and investors. A survey by removalist website Muval found 39% of Australians bought entertainment appliances when moving home, but only about 60% of property purchases are made by owner-occupiers. Television purchases were therefore weighted at 23%.
Economists also pointed to the "wealth effect" whereby people spend less when they believe their home's value is falling. We excluded that from our analysis because the project focused solely on spending directly linked to property transactions.
Some effects, after all, are much harder to measure.
($1 = 1.4088 Australian dollars)
(Reporting by Byron Kaye and Stella QiuEditing by Shri Navaratnam)
