How's the Market...Which One?

We’ve all heard recently that the market is crashing, but there are literally thousands of markets in Australia, so which one's are they referring to?

There are a few astute investors out there remain bullish on the property market in general and believe in the next 12-18 months there will be an extreme housing shortage across the major cities, which we have mentioned in previous weeks.

Some of these astute investors and property moguls are the large-scale developers operating throughout Australia, some of whom have seen rather bad times during their years but are firm on the approach, if you can hold the property through this time, you’ll benefit on the other side.

I tend to agree with them because on this if you compare today’s market with that of the start of the pandemic, it was very similar. Both markets received negative reporting from the media with large market crashes predicted and both experienced limited stock. This is where experience comes into play because if you have been through something before you can see certain trends and be a little more confident in what to look for.

This then brings into the conversation the topic of the “market” and what markets should you be buying in and which to avoid during this time. Now we look at the “market” a little differently than how the mainstream media reports, as they blanket the market as one, which might be Melbourne or capital cities, sometimes even the whole of Australia.

If you’re buying or selling try not to only consider the market in this way because there are so many markets and micro-markets throughout Melbourne, even multiple markets within a suburb and quite often different markets down to a street. You have the areas to avoid, the areas more prestigious and tightly held and even the topside and bottom side of a street. Then you have new or old, and property types such as houses, apartments, units, townhouses etc which all occupy their own market and move at different speeds.

This is why it’s important to examine different price points of the market and make up your own mind, so let’s get on with it.

What the agents are saying

Pretty much across the board, agents are facing a stock issue. There are simply not enough listings coming up, and this refers back to a few weeks ago when I gave an example of how the property cycle works in a normal year here in Melbourne. We are at that point where vendors feel this might not be a good time to list based on the news, school holidays, what friends are saying and the weather. Whatever the case, it impacts the supply and can cause good properties to sell above expectation due to the demand.

Now there is a caveat here that goes across all price points, which is: properties that require any sort of building works will suffer in this current market given the uncertainty of building costs. Those looking to sell a property that requires work, will either need to reduce expectations or try to undertake the works themselves prior to the sale as it might be easier to sell something that is move-in ready.

Price point $2.5m plus (Houses)

Still solid across the board, it's just as above, supply is thin causing a lot of interest on good properties. There are a few auctions coming up in the next week or two that will provide insight as to how this price point is fairing, but at the moment nothing is hanging around for months and months unless there is something wrong with it, or it’s overpriced.

$1.2m-2.5m (Houses)

This is probably the most cautious market and the buyers who don’t seem to be in a rush. They are 30–40-year-olds who are upgrading, not that experienced in purchasing property and still might have a larger debt due to not being in the market as long. They might be referring to parents to help them with the purchase but are being affected by what is happening in the media.

I have a feeling this will shift over time, and once school holidays are over there might be more of a need to purchase which will get them across the line when it comes time to commit to something.

Sub $1.2m (Houses)

Like the above, most suburbs are still short on stock. I had one agent tell me this week that his office has the least stock he’s ever seen on the books in his 20-year career. Due to this, prices aren’t struggling nearly as much as some buyers are anticipating – especially if they’ve been watching the news.

One agent told me that a buyer said to him at an open “What’s going on, I thought the market was supposed to be crashing?” as he gave the agent his number upon entering behind a crowd.

Compared to last year, good properties that used to have 30 – 40 groups through an open are now receiving 4 – 5 groups, however, this is enough to still get properties to sell.

Apartment stock

A bit of an extra this week as I can feel a changing of the guard happening here, and this is the older style flats which I’m sure you’ve seen me mention before.

With the new financial year, some investors are getting in early to offload properties and take advantage of the new tax year to spread their income.

Now focusing on the older style, walk-up apartments selling anywhere from $450k- $800k these aren’t attracting the buyer which might have held the property for the last 20-30 years, they are attracting first home buyers and owner-occupiers. Why this is of interest to us, is because this could mean a dramatic shift in the way these properties are maintained and improved over the years to come. Owner-occupiers tend to be more house proud and might look to be more active in the owner's corporation. They might want to improve the landscaping or the overall street appeal of the building. This to me can only be a good thing for this property type and one I have loved for many years.

In the media

A prominent real estate figure came out over the weekend calling out the RBA and the impact their rate hikes are having on the market. They also went on to somewhat try and scare vendors into listing their property today and not wait for Spring when the market will be more competitive.

Now, this might be true in some sense as you will be in a market that is less competitive, but I know the video posted on social media has a lot of agents questioning the motives around it, and why you would use fear to push people into a situation.

My take on this time of the market and when to list is simple, list when you want to and when it it suits you best. Speak to agents if you like to get multiple views, but more of the time they will tell you now is a good time.

The reason behind the video outburst? I’m not sure to be honest, it looks to be maybe a bit of desperation, but it did smell a bit off to me.

Final Thoughts

When you consider all things above and take a zoomed-out approach, the market seems more so to be balanced with some good opportunities available for both vendors and buyers.

There are many versions of this, but I was told very early on in my career that, “The best time to buy real estate was yesterday, the next best time is today” and those of you out there who have owned property for 20-years-plus can attest to this. There is no secret to building wealth in property, it’s more about taking action, getting the right advice and knowing the risks involved.

Overall, our market is still cheap compared to the world cities we sit next to, even Sydney so there should be room to grow even with interest rates heading up (hopefully for the short term).

Vendors not bringing stuff to market might bring on a small mini boom due to the lack of stock, but this will be overcome hopefully in the next week when vendors look to get ready for an auction in August.

Happy buying!

Note: This is my opinion, please seek your own expert advice when making decisions.