40 Years in RE. Is this the most confusing market ever?

i have worked in and owned Real Estate for a period of 40 years on 19 Sept.

I am very cashed up at this moment but am confused by the quick turn around of the NW Sydney market. The only thing I bought in the last 6 months was a new PPOR to keep most of my cars under the same roof. I’m puzzled as I have never been in this position before.

There seems to be so little stock and prices are stronger but not stable.

Am I losing my confidence or do any other land bankers, bigger investors feel the same.

I did see a block of 8 poor quality flats in Kirra beach for $2m as a long term future investment, but I don’t like buying outside my comfort zone.

 

Without a crystal ball its tough to know when we're in a good market. Buying good assets consistently will essentially dollar cost average your investments over time through booms, busts and everything in between. If you know your markets and what represents value then I'd be confident knowing your down side is limited. By-enlarge we're all doomed to varying extents if media headlines of an impending recession/global crash comes true. For me, while I understand patience can be vitally important at times, I trust that the more deals I do, the more I learn and the more opportunities become available to me Ill be better off in the long run. I am by no means a sophisticated investor but have come to this conclusion partly to assist my own mindset and confidence after thousands of hours of listening, reading and researching. Sometimes it just helps to articulate your thoughts to move forward

 

Short term optimism as it’s not the end of the world - government didn’t change and interest rates going down further - ppl who would have wanted to buy and have been on the sidelines have some confidence to buy again after a 10-15% drop and pause . Nothing has really changed and with affordability so stretched, I think it’ll be a short term move upward followed by years of stagnation.

I was surprised to see how quickly it has bounced though so I guess we’ll have to wait and see..

 

Macroeconomics is very hard to predict... Especially with globalisation. Equity and property markets never seem to follow academic wisdom. Which is why you have Steve Keen and Martin Norths..

 

Nah, nothing changed.

I have been on this property road for 40 years as well. The more people tell me it is confusing, it is different this time, it was easier in the past, ..., the more I realise nothing has changed.

Buy good property and keep it forever.

I know that is so last century. If one waits long enough, some “property genius” will espouse it and it will become popular again.

In the meantime, I will continue on my wealth-creation journey.

 

Not been in the game as long as you (almost half that) but have similar thoughts. Have seen a few developments in the past week with really strong margin but don't feel the confidence to commit to any of them at this point after how quickly the market conditions eroded last year.

Plenty of people are getting on with it though...

 

We have haled interest rates in 5 months. 4th June the cash rate was 1.5%, 2nd October it hit 0.75%.

I don't believe this has ever happened before in history. Not even during the great depression.

 

Went from 7.25 in aug08 to 3.25 in feb09.

 

Thanks. Still a bit of a worry if the Scott Morrison / Josh Frydenberg "Strong Economy" needs interest rate cuts equivalent to when Lehman brothers collapsed. Something doesn't seem right. Consumers & Investors probably should be cautious.

 

And is that worry different in scale to when you believed that rates have never halved this quickly including during the 30s?

Risk is a scale, not yes/no.

 

I've just come back from a number of inspections this morning and there's a huge volume of people looking at properties that are well located/have potential. The speed of the drop was a surprise but the strengh of the bounceback is even stronger, question is how long it will stay up..

 

Which areas and price range, mel?

 

But are they buying?

Talking to agent friend this week who had 8 groups through, on private appointments (not open for inspection), in one day on a particular property ... yet not a single offer

 

Car Tart, you are definitely not alone in this confusion! There is an instability in the market. Sure, there may be or interest or numbers through inspections, but Spring always seems to increase that browsing activity, not necessarily ready buyers. And, you are right, there does seem to be a reducing pool of stock to choose from, especially in the more niche market you are looking for.

Maybe it is a bit of Murphy's law, when you have the money, it is harder to find what you want to buy. And when you have limited funds, you can find anything and everything when window shopping

 

Everybody is following and trusting in macroeconomics when I believe the biggest influencer is the media. There is just too much media coverage (more now due to social media). If channel 9 says to buy, people will buy.

Probably only 5% of buyers exist on this forum, maybe another 20% exist that do decent research then another 25% with pass mark research. I feel the other 50% (if not more) are governed by what the media are saying.

This isn't just in property but all forms of life.

 

Yep. This point about the media is spot on.
We had a correction because Sydney Morning Herald et al “predicted” we would.
Then we have had a recovery when and to the degree that they run their usual Friday “boom is back” stories right before auction day

 

IMO this is pure speculation from various corners purely to avoid recession next year. Various parameters to name a few
Low supply
Artificially creating demand
Higher house prices may lead to spending
Waiting for mining prices to go higher
Global interest rate scenario (Who will be first one to go for 0%) etc.

Again, this may be a good time to sell, a window of opportunity when a burst of properties comes into supply next year. Buyers beware not to go for more debt.

 

The best advice I ever read was:
“It’s never a bad time to make a good investment” (Noel Whittaker).

 

... and it’s never a good time to make a bad investment .

 

Almost.

Where does Fairfax get it's data from?

Yes, Corelogic!

The current narrative is that the Corelogic data is faulty. Have a look at the Corelogic Index below. There are three slopes. The first decline stops on the 18th May - Election Day. No surprise there. Negative gearing didn't get abolished.

The index then started to mildly trend up until the 13th August.



What happened on the 13th August? No one knows.

Sydney house prices surged 0.68% in one day, Melbourne 0.62%. Huge jumps. Then look at the slope ever since.

It's now believed Corelogic lost access to Hometrack data (Hometrack was purchased by the REA group) and the Corelogic data sources are now made up of mainly high end properties.

It is the high-end segment that is increasing in value, while the lower end of the market is still falling in price. Hence the Corelogic index is now amplifying the top end of the market and is less representative of the falling middle and bottom end of the market.

There has been recent interviews with REA Group Chief Economist Nerida Conisbee. REA group, who has excellent data from the backend of it's realestate.com.au platform where RE agents have to enter actual sold prices to close out a listing, indicates they have not seen the strong "corelogic" recovery. Sydney is still falling as a whole, Melbourne is marginally up. She however does reports pockets - mainly top end markets where prices are on the rise.

Ironically, Limited News, part owner of REA Group is using Core Logic numbers because they are better. Sales volumes are still down a long way, and this is effecting profitability for REA. They need to get sales transactions up and faulty Core Logic data should help encourage investors into this "booming" market.

The extremely low sales volumes could also be another factor in all of this.

I would avoid making any investment decisions on Corelogic data. I suspect in a couple of months when the actual valuer general data is available, it will show a flat recovery at best.