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The Moore Methodology
What is it?
The Moore methodology provides a 'light bulb' moment into the supply demand equation for an area. It is used by Professional Property Investment Advisors to help their clients make informed property investment decisions.
We use trended house price data and present it in a way that allows us to;
It shows the relationship between the days on the market versus the median price as readily available measures of supply and demand.
Ultimately it provides confidence and support for investment decision making.
How it came about?
In 2002 a number of investors wanted to work out the formula for property investment success. No more secrets being sold via education for thousands of dollars, there had to be a transparent understanding, however no one had put the elements together yet. These 60 investors spent over $120 million on property investment in a short period of time.
The results of this study, by John Moore, are now encapsulated in an industry standard Property Investment Advice course offered by the Property Investment Association of Australia. http://www.piaa.asn.au.
How it works?
By mapping the rolling monthly Days on Market (the number of days it takes from when a property is listed until it is sold) over a period of years, one can readily identify the strength of demand.
When this chart is overlaid with median price growth for the same period of time you can assess the strength of supply. It is the understanding of this equation that is the Moore Methodology.
The following chart shows the Days on Market (Units) for Chatswood in NSW between the years of 2014 and 2016. It is overlaid with median price growth for the same period.
The graph shows that over the period between May 2014 and March 2016 the median price increased from $1.4m to $2.05M a change of $1.05m. This is around 80% growth in property price in 2.2 years.
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Deception Bay, QLD
The following shows a chart of the Days on Market Versus Median Price for Deception Bay. We can identify from the chart that there was little or no movement in price from Mar 2013 to July 2014.
Prices started to move once the days on market reached the 80's and below. Major price movements occurred once the Days on Market reach 80 or below. From 2014 to 2016 we saw a $45K change in House prices.
This represents an annual capital growth rate of 7.5% p.a.
The following shows a chart of the Days on Market Versus Median Price for Manly in NSW. We can identify from the chart that once the Days on Market drops below 65 the supply demand equation moves towards increasing demand.
As the number of Days on the Market trends lower we could deduce that prices will move higher, and, this was the case until March 2016.
The period of 2 years from March 2014 to March 2016 shows a growth of 450,000 in median house price.
This represents an annual capital growth rate of more than 10.7% p.a.
Note: Between December 2014 and May 2015 interest rates dropped by 0.5 basis points.