Smooth buying in a turbulent market - July 2019
July 11, 2019 / Written by Rich Harvey
One thing you can say with some confidence about Australia’s property market – it’s rarely boring.
There’s are significant elements across every market cycle that fire up conversation. In fact, it seems every man, woman and their dog has an opinion about the state of real estate around Australia and what’s likely to happen next.
It’s impossible to avoid – turn on your television, flick open a newspaper or prick up your ears at a social gathering and you’re bound to hear points of views from all ranges of observers.
Some opinions are founded on good evidence and economic modelling, but others are alarmist and based on wild speculation and limited knowledge – while many are just plain wrong and should be ignored.
But in a world full of noise, who should you believe and what data should you take seriously?
Here are my thoughts.
First up, let’s consider the data at your disposal.
Property investors have a wealth of information at their fingertips that can help form a picture of what’s happening now, what happened in the past and what could happen down the track.
Median property prices give a broad view of how a capital city housing market is performing. They will show the pace of increases and decreases in a month, quarter and year and, while not a nuanced metric, they do tell a generalised story.
What the current data is telling us is, generally speaking, the rate of declines in the big markets of Sydney and Melbourne have ceased. Some pundits have even acknowledged we are at the bottom of the market and leading into an imminent recovery phase.
That said, we know cities like Sydney aren’t just one big market, but a conglomeration of many. What the overall capital city median data doesn’t tell us is which suburbs are performing well and which are still lagging behind. It also doesn’t indicate what property types – big family homes, brand new townhouses, land to subdivide or old but solid units with room to add value – are leading the charge.
These measures are imperative and usually require a keen eye backed by experience to determine the details. It’s important to have insight into individual areas and market segments by enlisting the services of an independent, qualified and experienced buyer’s agent who is active on the ground.
Looking at Sydney’s imminent bottoming out and buying a random holding is a strategy doomed to fail.
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Other market data to draw on includes activity on popular property portals like realestate.com.au and domain.com.au, who regularly detail which suburbs are seeing the most queries from prospective buyers. They include suburb profiles with additional info too.
Auction clearance rates also give insight into market sentiment by showing how many properties are selling under the hammer each weekend.
The ABS is another handy source. Their data includes the number of new home loans issued in a month and quarter, which illustrates the level of activity in each market. The more new buyers we see, the higher the level of likely confidence.
Other elements worth watching are construction approvals, first home buyer activity, stamp duty transactions, interest rates and lenders’ mortgage insurance policies.
If you, or your advisor, has an ability to read these market ‘rune stones’, there’s plenty they can tell you about what lies ahead.
Beware the vested interests
When it comes to who you should listen to, it’s always worth having a look at an individual’s background and their motivation for dishing out advice.
Are they experienced in property economics or research? What have they said in the past and how accurate have they been? Are they prone to making very big declarations that scare or excite?
There are regular commentators popping up claiming property prices will fall like the sky on Chicken Little’s head. A deeper dive often reveals they have a book to sell or a speaking tour to plug.
There are a lot of people who have a lot to say about real estate investment – both positive and negative. Some are on the money and others have their own vested interests that motivate their opinion.
I tend to take seriously the word of qualified economists with runs on the board. Shane Oliver from AMP, Cameron Kusher and Tim Lawless from CoreLogic and Michael Blythe from CBA are some of my go-to voices.
They are experts who know the Australian and global economy inside out, and how it impacts property markets. They also look at the drivers of demand and supply in real estate markets and can forecast how it’s likely to shift in the short, medium and long-term.
Some journalists love a headline
I would never disparage our friends in the media. They perform an important public service in sharing vital news about all manner of topics.
But I’m probably in contact with more articles and broadcasts about property than most and I can tell you, there are some occasional shockers out there. Clickbait headlines and dramatic calls that grab attention should be treated with a healthy dose of scepticism.
Reasonable arguments based on multiple viewpoints and confirmed facts are worth looking at.
I like Ross Gittins and Alan Koehler, who are seasoned finance reporters that have seen it all when it comes to market movements.
So, don’t be deafened by the volume. Hone in on those sources of independent knowledge and verifiable data. Also, lean on your expert buyer’s agent who knows what to take in and what to shut out when it comes to information on real estate markets.
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