Leading property commentator Michael Matusik recently wrote an article explaining why he things now is a good time to buy a property in Brisbane.
Matusik is one of the few researchers who correctly predicted the slowing of the Queensland property markets a few years ago, so I find his change of heart encouraging.
In his article in the Courier Mail Matusik says:
The residential property market has been sailing like a rudderless ship of late. And the fact we have been somewhat out of step with housing markets across the world seems to be making some a bit nervous.
But indications are, in theory at least, that in Queensland and especially in Brisbane, now appears to be a good time to buy.
To illustrate the economic theory behind market supply and demand, I like to use the property clock. We have used the clock for illustrative purposes in the past, when the residential market was in somewhat uncharted waters, as it is right now.
Let’s consider the traditional property clock, where 9 on the clock indicates the start of an upswing; 12 represents the market peak; 3 is the start of a downswing and 6 is the location of the market trough.
The positions on the property clock are determined by supply either undersupply or oversupply. Everything else is either leading in to or out of one of these market conditions.
Many of the residential markets across the country are positioned between 2 and 7 on the clock. Far too many people wait to buy near the market peak, rather than during a downswing or at the bottom of the market where Brisbane is located at present.
How to tell the time
12 o’clock the market is undersupplied, demand exceeds supply, strong economy. Rents and prices rise. This is a vendor’s market best time to sell.
3 o’clock the market is “evensupplied”, supply of properties matches the numbers of buyers. Asking prices become overwhelming; interest rises. Buyers wait for discounting to begin a very cautious market.
6 o’clock the market is oversupplied. Harder economic times; buyers become frugal; residential property loses its shine. Ironically, this is often the best time to buy as many properties are undervalued.
9 o’clock the market supply is tight. In the lead up to this point, stock is either withdrawn or sold. Prices rise; buyers become more optimistic; property starts to become overvalued once more.
Consider that residential markets also tend to fluctuate between undervaluation and overvaluation.
What is “high” for a market (at 12 o’clock) and what is “low” (usually around 6 o’clock) is largely a matter of history. Over-valuated markets can be very seductive and hence are why most buy too late, while the opposite sentiment holds true at the bottom of the cycle.
Keep in mind that property values usually increase over the long term, but when you choose to move, either as a buyer or a seller, is second in importance only to location.
Source: Courier Mail
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