Key facts
- Reuters calculated the commercial spending generated when an Australian sells a home, buys another, and moves.
- The analysis excluded state government stamp-duty revenues and bank earnings from mortgage repayments.
- The calculation was based on Australia's median home price of A$1.11 million and a three-bedroom detached house.
- Agent commissions were assumed at the common 2% to 3% range.
- Pre-sale painting costs were weighted at 25% based on a survey indicating only a quarter of sellers undertake the expense.
- Television purchases were weighted at 23% based on owner-occupier purchase rates and appliance buying habits.
Reuters has detailed its methodology for calculating the economic ripple effects of Australia's housing downturn on businesses dependent on property transactions. The analysis, aimed at measuring the impact on the vast ecosystem built during the country's quarter-century property boom, focused on commercial spending generated when a home is sold and a new one is purchased.
The calculation covered costs from agent commissions and listing preparations through settlement, moving expenses, and purchases of furniture and appliances. Reuters used a range of mainstream advertised prices for goods and services, rather than extreme outliers, and weighted each item by its likelihood of occurring during a transaction. For instance, agent commissions and conveyancing settled on the PEXA platform received a 100% weighting, while pre-sale painting costs were weighted at 25% based on a survey indicating only a quarter of sellers undertake the expense.
State governments, despite seeing revenue hit by the slowdown, were excluded as they are not commercial entities. Banks were also excluded because their housing-related earnings stem primarily from mortgage repayments rather than transaction volumes. The analysis was based on Australia's median home price of A$1.11 million ($790,000) for a three-bedroom detached house. Economists' feedback was incorporated to adjust for the roughly 60-40 split between owner-occupiers and investors, influencing the weighting of purchases like televisions to 23%. The "wealth effect," whereby people spend less when they perceive their home's value is falling, was excluded to focus solely on spending directly linked to property transactions.