Why the total transaction count is a poor guide for an investor

Property market commentary is full of the line: "Transaction numbers are up / down — the market is picking up / cooling off."

For the economy as a whole, perhaps. For an investor, this is one of the most overrated and misleading indicators there is.

Transaction count ≠ market quality

The total number of transactions shows activity, but it does not show:

• who is buying;
• what they are buying;
• at what price;
• for what purpose.

One deal at €180,000 and one at €1.8m are the same single unit in the statistics. For an investor they are fundamentally different markets.

What usually sits behind a rise in transaction numbers

Growth in the total number of transactions is most often driven by local buyers, the resale market and mortgage-funded deals.

As a rule, that means:

• a low average ticket;
• high sensitivity to bank rates;
• almost no connection to investment returns.

Growth of that kind tells you almost nothing about the liquidity of investment properties, the outlook for the new-build market, or your exit options in 3, 5 or 7 years.

What actually matters to an investor

An investor is asking different questions:

• is foreign demand growing;
• who exactly is buying (geography and nationality mix);
• how the structure of transactions is changing;
• where new stock is being created;
• how easily and profitably the property can be sold or let.

This is precisely why a market can look healthy on total transaction numbers and be risky from an investment point of view at the same time.

The classic mistake

The most common reasoning goes like this: "There are more transactions, so the market is growing."

But in reality the ticket may have fallen, liquidity may be worse, investment risk may be higher, and so on.

And the reverse:

• fewer transactions;
• but a higher ticket;
• a better demand structure;
• a clearer exit.

Why I do not use this indicator as my main or only one

Because I work with foreign buyers of properties under construction, who are buying as an investment and also for a deliberate relocation of their family and/or business.

In that world the total transaction count is background noise, not a signal. What matters far more is the structure of demand, the dynamics of investment transactions specifically, resale speed, and who will still be a buyer several years from now.

Conclusion

The transaction count answers the question: "How active is the market?" The investor is asking a different one: "How liquid and predictable is the market on exit?"

And these are not the same thing. That is exactly why in this channel I look deeper than the headline figures in the reports.