Percentage Sales Growth
What is the PSG?
PSG stands for Percentage Sales Growth. The PSG is the percentage increase in the number of properties sold over the last 12 months.
For example, there may have been 100 sales in the year ending December 2014 in a certain property market.
But in January 2015 for the same property market, the sales for the last 12 months may have been 110.
So there was a 10% increase in sales volume.
The PSG is a precise figure for what many refer to simply as change in "sales volume".
Why is the PSG important?
Contrary to what many investors believe, increased sales volume is actually NOT necessarily
a big indicator of capital growth potential. Only in specific circumstances does it have some influence,
which is why the PSG is still included as part of
the DSR+.
However, increased sales volume can potentially lead investors into a trap - especially if used in isolation.
There are cases when a high change in sales represents potential over-supply.
For example, when a new estate is opened in a suburb, extra stock comes onto the market. This represents
supply. Supply is the enemy of capital growth.
If 500 new properties are built and only 400 sell, then the sales volume would show a marked and sudden
increase for the suburb. However, the over-supply of an
extra 100 properties would actually dampen the chances
of capital growth.
Even if all 500 properties are sold, demand only matches
supply. As investors looking for capital growth we want to find locations in which demand exceeds supply.
A simple increase in sales volume doesn't necessarily mean that.
The PSG becomes an important indicator in markets where there is little extra supply.
Check the location for recent new developer stock coming onto the market.
Is the PSG reliable?
The actual figure for the PSG is not hard to calculate and usually incorporates a good sample size. Only in very thinly traded markets does it become inaccurate. If sales number less than about 40 for a market for the year, you may find the PSG becoming less reliable.Base data and other sources
Some alternative sources for this kind of data include: