DSR(demand to supply) score in YIP magazine.

Hi all,

I've been reading YIP(your investment property) magazine for a while now and want to get an opinion on the reliability of the DSR (demand to supply ratio), (it's in the section "state of Market" of the YIP mag).

has anyone bought property based on a recommended DSR score only?

if you have bought a property based on the DSR, has the property reflected the dsr rating?

any comments will be appreciated,

cheers,

Simon
 
If the DSR (demand to supply ratio) in YIP magazine, is measured in the same way that www.realestate.com.au measures it, then it is not a particularly acurate measure in my opinon.

Demand is measured by clicks of a mouse (seaching for property in that area). Supply is measured by the number of listings advertised on re.com.

It could give some clue, but nothing more than that.

I prefer to go to Opens & auctions. There you have 1 supply, and you can see what the demand is like. (i.e whether losing bidders turn up at the next auction etc) .Repeat for each property on the market.
 
From having dealt with a few buyers over the years, it looks like ya canna beat on the ground research, either as the buyer, or their appointed agent et al

ta
rolf
 
No I haven't but am intrigued in applying it

I did some deep research into the DSR score a couple of months ago. I don't think it is going to help you identify a single property to purchase. However, it is somewhat intriguing as a technical analysis tool for identifying hotspots. I will probably use it to assist with my next purchase alongside my other methods involving technical and fundamental analysis.

It is marketed/sold by this company; http://www.redwerks.com.au/dsr-score

It appears that they use the tool as a way to bring buyers into their development schemes. But I cannot see anything that suggests you have to buy their developments. I think they are currently pushing developments in Bowen, QLD that appear to be supported by a strong DSR score.

Have a look at YIP back in March, I think. It contains a deep article explaining the methodology it uses and applies it to a couple of real world examples. The author seems like a very intelligent and thorough researcher that has made very good investments using this methodology that he has developed.

Will it work for the rest of us? I honestly don't know. But I am going to use it to augment my existing methods in the hope that it gives me an edge in identifying the next hotspot. From there, it comes down to my typical due diligence to identify individual streets and properties that may provide a further edge.

In summary, I think I will give it a go.

Edit: Added the YIP article I received in PDF format for those that are interested.
 
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hey all,

thanks for the replies. I think I'll use some of the data to suggest what suburbs to buy into next. However like some have suggested, nothing like doing ground research driving around the suburb and going to home opens etc.

emptyvessel -what type of other fundamental and technical analysis do you do?

cheers,

simon.
 
Thankyou for the info Emptyvessel, I see now, it's all about research and perhaps converting into a sort of data, (and part of their business also?)...very nice, clever Jeremy Sheppard. That is good research.

Research is fun.
 
Dsr

Hiya

Just checked this DSR thingy in July's YIP magazine; and guess what!
my postcode came up tops in the whole country! :p


Be careful tho': there are 3 suburbs within a single postcode so for eg. the suburb was Westleigh but there are 3 suburbs within the postcode 2120: Westleigh, Pennant Hills and Thornleigh...

Houses are still moving in Pennant Hills: a 4 bedroom fibro on 500 sqm on Laurence Street just went for 730K! crickey!
 
How can this DSR identify a hotspot?
More clicks ~= More demand = More offers = High Price
Isn’t it too late to go in after DSR is gone up??
 
How can this DSR identify a hotspot?
More clicks ~= More demand = More offers = High Price
Isn’t it too late to go in after DSR is gone up??

Agree, you dont want to find somewhere with a high DSR score now, you want one that is increasing sharply from a low base. And therein lies the problem...you still need to make assumptions and forecast.
 
Dsr

Hiya

If you read their definition of high DSR, it says clealy a high DSR equates to "potential growth greater than 11% per annum"....
 
Hiya

If you read their definition of high DSR, it says clealy a high DSR equates to "potential growth greater than 11% per annum"....

on the assumption demand continues at or above the current rate in any given area.

The DSR scores listed in YIP have little value in my view, and I certainly wouldnt be blindly relying on someone elses research to dictate where I put my investment dollar. Having said that the research methods are certainly sound there is great merit in following the process yourself.

The best part about the DSR in my view is the supply side analysis.
 
Dsr

Hiya

Of course, i would not advocate blindly following their suburb recommendation; i am merely stating what THEIR DSR defines !:)
 
Hiya

Of course, i would not advocate blindly following their suburb recommendation; i am merely stating what THEIR DSR defines !:)

In their definition, over how many "per annum's" do they expect to achieve that 11%+ growth? my guess is, that there will be some very short term growth left, but those levels are unlikely to be sustained.

As I understand it the idea behind the method is to obtain sharp short term growth in order to leverage into your next investment. Good strategy in theory, but not without risk. It essentially means you are buying in a hot market the whole time. Plenty of reputable property commentators advocate against that, and suggest the counter cyclical approach. Each to their own I guess.

The other issue is you need to be able to move very fast once you've identified area....not something that is generally associated with property purchases.

As I said, great method to assist with research, particulary on the supply side.
 
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I was looking at some of the data in the reports you can download from their site and noticed many wacky stats ....like 140% of properties in some towns/suburbs for sale. WTF!!! I queried this with them and was advised that the report is based on stats sourced from many places - therefore only as reliable as the data they base their DSR score on. Anything under a score of 6 or 7 in reliability is considered too unreliable.

Considering the variation in stats provided from different accompanies measuring the same thing................I don't put much faith is stats.

I would use the DSR only as a possible guide - among many others. On the ground research is the most up to date and accurate you can get. It is only when you know from first hand experience how incorrect some reports are that you really start to doubt anything you have not confirmed first hand. The other day I noticed on Domain.com.au in auction results that a house sold for $927k, whereas it was actually sold for $147k. I know this because I was bidding at the auction!!!! This is so far out that people would realise was a mistake, but what if only out by 100% ... could be assumed was correct unless you knew the area and the house. (And no, it was not in Sydney or any capital city!)
 
Read this for some more about his methodology

Make your own mind up.

Like I said before, I am going going to use some of these measures on top of the current fundamentals and technical analysis I do already. Some of what Jeremy does I was doing manually already. Others, not at all.

Of course you need to apply your own "sensible" filter over any statistics that are stated. It is really no different to using a GPS in your car. If you expect it to drive the car for you, your deserve to crash and burn.
 
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Some DSR Clarification

Just to clarify a few things about the DSR...

1 - It doesn't replace fundamental research.
Nothing is ever likely to replace good old fashioned fundamental sleeves rolled up kinda research. The DSR is more of a short-listing tool to identify suburbs worthy of that research. It serves as a helpful starting point when looking for that next hot spot when you have the whole country to choose from.

2 - The focus is on imbalanced supply and demand.
It is designed to identify markets where there is an imbalance in demand and supply and objectively score them. If the law of supply and demand is right, then it is the only thing affecting price changes. And if the DSR can accurately gauge the demand to supply ratio, then it has some merit. Time will tell - the DSR is relatively new - it's only been around since January 2010.

3 - It's a combination of stats.
8 statistics are used in the calculations. Some can get pretty whacky and I've made changes recently to prevent stock on market from getting above 100%. I'm in the process of trying to improve the quality of yield calculations. Some sales agents list houses for sale in the rental section of Domain. So I've seen yields in the thousands of percent, calculating the rental income each week of $350,000!

4 - Filtering is used and needs improvement.
If the data is insufficient for a market, then it is weeded out. Currently, 80% of all localities around Australia are typically filtered out of the results. Places like the Simpson Desert North and the Coco Islands are obvious exclusions.

YIP mag only show a portion of the complete list. The final list available consists of about 5,000 markets where 1 market is a suburb and dwelling type: units or houses.

API mag used to publish the list in 2010. Now YIP mag have exclusivity.

5 - It has some proof of performance.
The API Top 100 report card for 2010 is on the API website at the time of writing. Capital growth for all the locations recommended last year by the gurus like Lomas, Ryder, Koulizos, et al was 7.33% on average for the year ending March 2011. The top 100 DSR markets for the same time frame averaged just over 11%. That's with no fundamental research at all - just the stats.

6 - It's a lead indicator
Because the DSR is a measure of the "current" imbalance between supply and demand, there is no need to buy into an area before it has achieved a high DSR. Trying to predict the DSR is unnecessary. In other words, the DSR is a "lead" indicator.

7 - Markets are always trying to balance.
I don't know how long it will take for an imbalanced market to re-balance. The markets of January 2010 with the highest DSRs are still pretty high now. So it's looking like 3 years or so I guess. Something must close the gap between demand and supply. It's either decreased demand or increased supply. Demand usually dissipates with an increase in prices. But not always. The property market does move quite slowly.


It's early days yet and I wouldn't buy a property based purely on the DSR or other stats. However, I have sold 4 properties in the last year based almost completely on their DSR scores. I'm a little biased in my belief about it though of course.

Anyway, I'm sure it's no magic bullet. Just another tool in this investor's due diligence toolkit.

FREEBIE ANYONE?
If anyone is interested, I'm happy to give away free copies of the latest data in CSV spreadsheet form if you can give me some constructive criticism about it. The July version will become available early August - late next week.
 
When I go to the motor-show I like to check out the Lamborghinis. I have probably looked at more Lambos than Mitsubishis or Fords, but I have bought those. In the same way I think many people browse in certain suburbs that they probably wont buy in. On the other hand people viewing in the less trendy suburbs might be more likely to eventually buy there.

IMO better indicators are truely forward looking, such as development under way, government spending on projects, new employment openning close by etc. It'd be an awful job compiling an area index for this, but I wish someone would do it :)
 
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Just to clarify a few things about the DSR...

Jeremy, thanks for that explanation. I agree that the DSR is a useful lead indicator. I also think that tracking changes in the DSR may be useful. An area where demand starts creeping up over a few months could well be an alert for further investigation.
I'll pm you for the data
 
Jeremy, thanks for that explanation. I agree that the DSR is a useful lead indicator. I also think that tracking changes in the DSR may be useful. An area where demand starts creeping up over a few months could well be an alert for further investigation.
I'll pm you for the data

Literally pipped me to the post. I was going to say i think a DSR trend analysis would be more useful than a snapshot in time.

cheers
 
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