Jeremy..... Is the freebee offer still open.....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.
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.