A property is considered “on the market” when it is advertised for sale. 

The “stock” on market is the count of properties in that market that are listed for sale. This is a supply indicator.

Supply is the enemy of capital growth. So, investors want the stock on market to be as low as possible. But how low is low enough?

In a small suburb, 5 properties for sale may be a lot. But in a large suburb, 5 properties for sale may be hardly any.

So, the stock on market is calculated as a percentage of all properties in the suburb.

For example, if there are 220 houses in a suburb and 2 of those houses are advertised for sale, then the percentage stock on market is 2 divided by 220 or 0.9%.

Calculating stock on market as a percentage makes the figure a more consistent indicator of supply across any sized suburb. That means we can compare the supply of property for a suburb in Sydney with a suburb in Perth using the same yardstick.

The SOM% can become unreliable in certain cases. One common case is when a developer releases a block of apartments. The selling agent may advertise only a single 2-bedroom unit as a “sample”. But the project may contain a total of 50 units.

A browse of the individual properties listed for sale on Domain or realestate.com.au will help.

Fun fact, %SOM can be higher than 100%. Sound s weird, right?  How can there be more properties for sale in a suburb than there are properties in that suburb?

Off-the-plans. These are properties that don’t exist yet but are currently for sale.

The %SOM is an important indicator to gauge the balance between supply and demand. But it can be volatile from time to time in small markets, so check an historical chart. The chart might also reveal a trend of gradually declining values, which means stock is drying up. When supply tightens, that quite often leads to capital growth.