Hotspotting using DSR and SOM statistics

[mgs4]

I'm just learning about the use and application of demand to supply ratio (DSR) and Stock on Market (SOM) statistics, supplied in publications like Your Investment Property Magazine.

My thoughts would be that the ideal DSR and SOM statistics would be a DSR score that is say above avearage to good (25 - 35) with an improving outlook, whereby the DSR is improving, combined with an SOM that is high say 1.4%+. The reason being that if there is more SOM the buy has relatively better bargaining power, whereas if SOM is low and the DSR score is good it might be very hard to buy anything at a good price. Obviously you hope the SOM is falling so that after you buy their is increased buying tension.

Do others have a different interpretation of these statistics?

 

[mgs4]

The other issue I see in using DSR figures is DSR is a reflection at a point in time, not necessarily the direction DSR is heading.

Eg if one looked to buy in areas with high DSR this could be reflective of buying at the top of the market whereby the DSR is currently high but falling, which you would want to avoid.

 

[vaughan]

I'm just learning about the use and application of demand to supply ratio (DSR) and Stock on Market (SOM) statistics, supplied in publications like Your Investment Property Magazine.

Did any of these statistics predict, 2 or 3 years ago, that 2770 would be the hot spot it has been for the past 12 months?

Just asking is all.

From memory, the magazines were full of stories about how good the mining towns were.

 

[Jenko]

Yeah, DSR score is what's happering at that point in time and this could potentially change pretty fast. The DSR score won't know what's coming up like, a new mine, a train station, etc. I think DSR score could be a handy tool to use on the properties that you have when you thinking about valuing them for equity.

 

[impala67]

Yeah, DSR score is what's happering at that point in time and this could potentially change pretty fast. The DSR score won't know what's coming up like, a new mine, a train station, etc. I think DSR score could be a handy tool to use on the properties that you have when you thinking about valuing them for equity.

http://hotspotcentral.com.au/research/dsr-score/

I tend to think it is a good tool to use when buying. However I would use it as more of a secondary tool.

 

[Jeremy Sheppard]

msg4,

To see good cap growth we want demand to be high and supply to be low, right. But a supply of zero is a mkt you simply can't buy into. So I agree with you that a "reasonably" low SOM is preferred. Good tip!

Also, I'd like to point out the DSR is a measure of the imbalance between demand and supply. I think when you say "...buying at the top of the market..." you're probably referring to the peak of a price chart. The peak in the DSR chart should pre-date the peak in prices because it represents the maximum imbalance point. It then takes time for the imbalance to re-balance, usually with prices rising to dampen buyer demand.


And Vaughan you're right that the DSR did not predict the current "hotness" of post code 2770 two to three years ago. Who did BTW?


And Jenko, you're also right that the DSR doesn't know the influence the opening of a mine WILL have on the market. It measures the imbalance right now - not what we are guessing will happen, but what actually is happening. If the announcement alone influences demand, then we'll see that in the DSR immediately. But an announcement that doesn't affect demand or supply right now, won't affect the DSR right now.


Interestingly, many of the gurus miss markets like post code 2770 because their research is what I call "newspaper based". A new mine will be in the news as will announcements by local, state and federal govt like the extension of a train line. And that's what draws all the developers to these places - news.

But the gradual effect on supply of tight council development restrictions like we've seen over recent years in the Sutherland Shire don't make news headlines. But they do effect supply. And the beauty of these mkts like 2770 is that you won't get a bunch of novice developers spoiling it for you because these mkts are not in the papers. Kick-on Mt Druitt!