How to tell when the market has turned - June 2020
Real estate markets haven’t crashed as a result of the coronavirus crisis like some pundits thought they would.
At the same time, that growth trajectory that many capital cities were on up until the pandemic hit has come to an abrupt halt. It’s especially the case in Sydney and Melbourne, which had rebounded strongly late last year but are now holding steady.
This presents an interesting opportunity for savvy property investors.
Think about it. After markets had been booming for a long period of time, just about every dinner party or backyard barbeque was dominated by conversations of ‘what if’. What if I’d bought a place in a hot suburb before prices took off? What if I’d invested at the bottom of the market?
Getting in just as markets are starting to rebound is the goal of any investor.
How can you tell when you’re in that sweet spot?
Make data your friend
There are countless metrics available to give you a good indication of what’s happening in property markets in real time.
But you need to consider them in context.
For example, auction clearance rates right now in Sydney are pretty extraordinary. Most weekends, we’re seeing ranges between 60 and 70 per cent, which is obviously extremely strong. The fact that the vast majority of listings are selling under the hammer is positive.
But, as you’ll know, that typical sign of a ‘hot’ market isn’t being reflected in median prices.
That’s where another key piece of data comes in. The data on the volume of listings shows that the number of dwellings for sale is low. And I mean low. Some agents are saying they’ve never seen a scarcity of properties.
This indicates that would-be vendors are very nervous and those who don’t need list are simply choosing to hold fire.
And while auctions are doing well in Sydney, and performing moderately in Melbourne, the volume of private treaty sales has fallen. Take Brisbane. It’s not a typical auction market – Queenslanders don’t like them – so the clearance rate isn’t reflective but looking at sales volumes shows that the level of activity is quite flat.
When you see listing and sales volumes increase, it’s a sign that both vendors are confident, and buyers are happily absorbing the influx of stock.
Level of demand
On that second point above, getting a reading on would-be buyer sentiment is also important. Rising demand is the spark that lights the fire, so knowing when this is on the up is a good way of picking a rebounding market.
This is a little trickier to determine but there are ways to get a sense of how people are feeling. Consumer sentiment surveys are a start – most big banks and financial advisory firms do them. Some business groups do too. It’s a finger on the nation’s collective pulse.
Check out ABS data on home loans as well as reports from lenders’ mortgage insurance providers on how many mortgages they’re backing. These figures come out fairly regularly, and while it might be a lagging indicator, consistent monitoring helps you plot trends.
For more property specific hints, check out the search volumes on real estate portals. Both of the big ones, realestate.com.au and Domain, have suburb-specific data on how many would-be buyers are performing searches. It gives you a sense of localised demand and how it’s tracking.
Realestate.com.au have recently reported they have had record numbers or people visiting their website over the past two months. This indicates would be buyers are actively circling the market and watching and waiting. I find it fascinating that there are record numbers looking during a pandemic – this shows property is sought after and resilient in the midst of a crisis.
Get out on the ground
Another way of taking the market’s temperature is to get out and see things for yourself.
Go to open homes and see how many people are spending their Saturday looking for a potential property purchase. Head to auctions to see how many register to bid and what the atmosphere is like. Drive around suburbs and see if lots of sold stickers are covering ‘For sale’ signs.
Check the windows of real estate agents. Talk to local café owners. Grab the weekend paper and see how thick the property section is and whether there’s a high turnover of ads.
A combination of hard data and qualitative research will help paint the picture. Of course, buyers' agents conduct this sort of analysis on a daily basis. They have the skills to spot the changing market well before the average purchaser.
If you’re in the market to pick up an asset before the market gets stronger, be sure to contact an experienced buyers' agent. They’ll keep you well ahead of the capital growth curve.
To have a friendly Buyers' Agent contact you:
call us on 1300 655 615 today.