How can you pick when the property market will turn?
That’s the million-dollar question I am asked on a daily basis.
My honest answer is that nobody knows what happens next, just ask those property experts who made all those wrong predictions a couple of years ago.
House prices were supposed to fall 30% +, but as history shows, they went the other way.
There is no doubt that our property markets have turned in recent months, with bigger capitals losing some momentum and other markets flattening out and prices falling.
Of course, this presents a great opportunity for those pessimists to emerge from their cocoons, predicting the sky will fall.
Almost every media headline puts a negative spin on the current environment of rising interest rates and inflation.
Despite the fundamentals remaining strong, most buyers and sellers have slipped into “wait and see” mode.
If we were watching a horse race, Fear would have just regained the lead over Greed.
But the finish line is a long way off.
Here are my thoughts.
Major downturn unlikely
It is easier to preach doom and gloom, as you see days on market rising, sales volumes falling, and the upper end of the market falling.
The media is having a field day cherry-picking negative data to push their agenda.
Overall this appears to be having an effect, with consumer confidence plummeting.
While nobody really knows what happens next, our economic fundamentals remain strong and a major property downturn appears unlikely.
For there to be a major downturn people would need to be in a position to be forced to sell their homes with no buyers at the other end.
Neither of these scenarios seems likely.
At the same time, unemployment has fallen to just 3.5%, which is the lowest rate in almost 50 years, and most who want a job have one.
While a recent article from RateCity has suggested the average homeowner is almost 4 years ahead on their mortgage repayments.
Most will be able to ride out these turbulent times until greater certainty arrives.
There is no doubt that some markets will struggle and fall, particularly in lower socio-economic areas or locations where supply far outweighs demand.
On the demand side, our borders are only just reopening to skilled migrants and students.
So while possible, a major downturn is highly unlikely.
What is really happening?
There is a considerable amount of focus on technical data at present and there is no doubt that there is less buyer activity around at the moment as sentiment has fallen from just 6 -12 months ago.
Auction clearance rates are also well down and stock levels remain lower.
If you look at our property markets in isolation, our markets are down, with the overall market falling 1.2% last month.
But overall our markets still remain in positive territory over the last 12 months, something we hear less about.
Is this not just part and parcel of a normal property cycle?
Rather than a major downturn or catastrophe in the making, we are likely to see buyers and sellers standing on the sideline until greater certainty prevails.
Or to use the horse racing analogy again, until Greed overtakes Fear once again.
Until this occurs, I see opportunity in our property markets, particularly if you follow the Warren Buffet line of thinking:
A window of opportunity
So with the property market likely to be in the downturn and consolidation phase of the cycle when will it turn?
It will likely be once people realise that interest rates and inflation will not hit 10%, and property prices have not fallen 20%.
At this point, those that have been waiting it out will return to buying and selling their properties and we will return to a normal market.
The time between now and then represents a window of opportunity for many buyers.
A time to strike while others wait in the wings.
I speak with our Buyers Agents at Metropole right around the country and each day we are finding amazing opportunities at the right price.
Opportunities that only months ago, we were missing out on as emotional buyers were willing to pay too much for.
While you can never time the market, it is only a matter of time before greed will overtake fear and competition for properties will ramp up again
Now is the time to take action.
