The Trading Up and Trading Down Imbalance

Just rounding out our analysis of households and their property buying inventions, having looked at investors and first time buyers we now turn to those seeking to trade up (sell their current property and buy bigger) and those trading down (sell their current property and buy smaller).

Those trading up are driven by expectations of greater capital growth (42%), for more space, 27%, life-style change (14%) and job change (11%).

Those seeking to trade down are driven by the desire to release capital for retirement (37%), to move to a place which is more convenient (either location, or for easier maintenance) (31%), or a desire to switch to, or invest in an investment property (18%).

In the past we saw a relative balance between those seeking to trade up and those seeking to trade down, but this is now changing.

Intention to transact, highlights that relatively more down traders are expecting to transact in the next year, compared with up traders.

Given that there around 1.2 million Down Traders and around 800,000 Up Traders, we think there will be more seeking to sell, than buyers able to buy. As a result, this will provide a further drag on future price growth, especially in the middle and upper segments of the markets, where first time buyers are less likely to transact. This simple demand/supply curve provides another reason why prices may soon pass their peaks. Up Traders have more reason to delay, while Down Traders are seeking to extract capital, and as a result they have more of a burning platform.

This analysis will be taken further in the next edition of the Property Imperative, due out in a month or so. Meantime, you can still get the April 2017 edition.


Author: Martin North

Martin North is the Principal of Digital Finance Analytics

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