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Sunny days predict higher house prices at auctions, but rain and long weekends bring buyers a discount, according to a new research led by the University of Technology Sydney.
Senior lecturer in finance at UTS Business School Dr Adrian Lee said that there is a link between sentiment (or mood) and house prices.
“Weather is known to affect mood, and some studies have shown a link between the weather and stock prices, so we decided to look at weather and house prices,” Dr Lee said.
Together with Maggie Hu, real estate and finance assistant professor at CUHK Business School, Dr Lee examined data from auctions and private sales in Sydney between 2000 and 2014.
They compared the data with corresponding Bureau of Meteorology information — including temperature, rainfall and solar exposure — as well as with consumer sentiment survey data.
They found that for auctions, but not private sales, a sunny day increased the price by 0.974 per cent, or nearly $11,500, based on the current median Sydney house price of $1,178,000.
Warmer days also achieved a higher auction price than cooler days; a 10 degree higher maximum temperature resulted in a 0.635 per cent increase in price or around $7,400 extra.
Rain, however, appeared to dampen enthusiasm, resulting in 0.174 per cent lower prices (around $2,050 less) at auction than on a clear day.
Dr Lee said that houses are not priced rationally.
“The price is partly driven by people’s feelings, particularly at auctions. So, if you are buying or selling a house, it is good to be aware of these influences.”
The analysis also found that on a long weekend, auction prices were lower than average. Selling around a public holiday resulted in a 1.3 per cent discount for the buyer, who was likely forgoing a weekend away.
On the other hand, selling around Melbourne Cup, either one week before or after, was linked to a 1.7 per cent increase in auction prices in Sydney.
Dr Lee said: “Our analysis was rigorous as we adjusted our estimates for the type of home — apartment, house, townhouse — as well as number of bedrooms, bathrooms and whether there was parking, among other housing characteristics.
“We also looked at the suburb, year of sale and quarter of sale — which controlled for seasonal weather patterns.”
He said that weather influences auctions but not private sales because sentiment has more sway in an auction situation, which is confined to a particular day and is usually held outside.
“Private treaty sales give buyers time to negotiate, so emotions factor less in the final outcome.”
The analysis showed that sentiment provided a premium on auction prices, particularly when the housing market was booming or there was a higher turnover.
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