How to pick that the market is about to rise?

Lots of talk about Sydney topping out - most believe it's there or there abouts if not already turned.

Some great observations over the last few months on how to pick the top (and turning) market - whether it's clearance rates, brokers talking about demand for finance, vendor expectations, number of people at viewings, etc.

Lots of predictions on when Sydney will bottom out / dead cat bounce - and the estimates vary by ... years. Nobody has a reliable crystal ball after all so no surprise at the diversity of opinion. But let's not focus on the timing of when, but how to identify the when ...

What are the signals we should look for to say the market has bottomed out and is now on the cusp of turning? Nobody wants to catch a falling knife, yet everybody wants to buy at rock bottom to maximise CG. In a CG strategy there is little point in buying too early and wearing holding costs in anticipation of the next upturn. The best time to buy is that sweet spot when a market turns the corner.

So what indicators to look for to say the market (say Sydney) has not only bottomed but has started turning a corner ... Upwards? Are they just the opposite indicators of the top of the market ... Or something else? Obviously it starts at a very local level - somewhere ... Pointless to look at statistics that are so aggregated that those first glimmer of a turnaround are hidden. Neither will you read about it in an investing magazine (investment-porn). Hot-spotters get it wrong more often than they get it right ... And when it's right it's pretty short term (mining town anyone?).

Interested especially to hear from the more experienced who have been through a few cycles - a few market tops ... and bottoms. What did you see, that nobody else did, that put the market back into a buy zone for you?

 

• Vacancy rates are low, rents are rising (ie demand indicators).
• Easing of monetary policy by banks.
• Media hasn't gotten over the last cycle.
• Taxi driver is talking shares
• Stock market is peaking (but still has steam)
• Number od DA's lodged are increasing.

 

"taxi driver talking shares" ... Love it.

 

My memory collection of Sydney around 2010, head lines was indicating renter were hurting because of the rising rents, and groups of 10-20 attending open inspection for rent.

My friends and colleague at that time could not find place to rent because they were either Indian or recent immigrants. Landlords became picky because there were multiple applications..

During that period I was able to increase $20-40 in between 6-10 renewal. What came afterwards with house price, we may have better memories...

 

.... tip.... always choose the employed immigrant family or workers over the local candidate unless the local candidate has an outstanding rental history (though it might still be hard to determine if the tenant is a major pain in the butt from that).

I've only given notice to vacate to 2 tenants... both white locals. One was a major pain in the butt, always complaining about something and the other was late on her rent payment on a consistent basis.

All my other tenants of 12 months tenure or longer have been of some ethnicity and all of them have been excellent thus far (touch wood).

So perhaps... I hate to say it but.... use reverse discrimination....

 

Nice Gockie, don't rent to white people....
How many IPs do you have? What's your sample size.
Discrimination is discrimination.

 

Sadly I have heard similar attitudes towards locals from some small business operators

 

I've rented to about 5 or more non white groups and 3 white people. But also I note that the white people are all singular, I suppose "previously married but now divorced" demographic whereas the non white have been the "standard" two parent demographic, not enough work history and savings to buy yet in Australia, or "the husband is working in Australia on a contract (professional job) while the wife and family is still in the home country" demographic, or just "the young and never married, on the way up" type.

I definitely think some of these groups bring more troubles than others. I was so happy with my first set of tenants, Indian couple with a son (later on they had a second son). I was sad that I decided to sell that property after they had been there for a few years and for that reason they decided to move out. But I caught up with them a few months after they moved out and they said they bought their own place.... so happy for them!!

 

It's all coming back. There were even stories of rentals being "auctioned" during the open homes in some areas.

 

Why would anyone factor someone's race for a rental? Surely the best applicant can be chosen on other factors such as rental history and ability to make payment.

As to an indicator of a rising market, agents stop calling you about a property they are selling and there are agents wanted notices.

 

Its very simple, property is all about supply vs demand.

What I have observed over 6 boom/bust cycles over last 14 years is this.... rising markets are harder to identify because it kind of creeps up on you and you don't really even realise, unless you are focusing on the market.

You will notice number of listings increasing, days on the market much shorter and stock is low because there are more buyers than available stock. As stock decreases, buyers become more anxious to buy, property starts to boom. It does not happen to every area at the same time, the aim is to jump in early when the market starts to rise, however largest % growth is usually close to peak.

Momentum builds up and then the herd is out in full force and this is when the re agents play games, Dutch auctions, auction before an auction, cos they can and it works.

Bust cycles, once again it creeps up on you before you know it, similar to what is happening in Syd at the moment. Anyone can paint a pretty picture, but what we are seeing is more stock hitting the market and less buyers, it is taking longer to sell properties because there are fewer buyers and there is more stock. Back to supply vs demand. Because supply is not yet saturated we don't declare it a bust cycle, but this is how it starts, give it 6 months and you will know exactly what I mean, because there will be way too much stock.

We are now seeing this happening in Syds west, that is why re agents are no longer opting for auctions, demand is no longer at crazy levels.
Why this market is changing is because of APRA engineered by Govt. to slow the market, economy and market sentiment. This will eventually effect every property market in Australia.

MTR

 

Yep. But there are plenty of owners who wont take immigrants, but they may be the best applicants. I had one guy who was in Sydney for a work contract with his family still over in India and he said he had a few rental properties in India.
Good tenant.
Anyway, they all have to live somewhere and if they get knocked back because of race, its just rude. Actually I was going to engage a RE agent for one of my properties not long ago and in my initial talks with him I found out he was discriminatory against certain groups. I said I just wanted the best tenant.
So sometimes the migrants need a hand to balance this out...

 

This is the point, and by the time the herd is running in, it's already turned.

 

Very carefully monitor news on infrastructure planning and approval, particularly for transport links. Can be a good lead indicator for getting in early. Once projects start the herds will jump in.

 

Few signs:

When your more financially astute mates are getting on board, but your less astute mates are saying it's about to crash, it's probably at around 5-6pm. By the time the latter are looking it's probably 10pm. When they get very frustrated and up the ante on auction bidding, party's almost over.

When the oldies on somersoft are talking about an area (let's take Sydney in 2012, a lot of oldies were talking about it), it's probably 3-4pm. When the new members who suddenly register an account in a month are opening threads about it (let's say Sydney threads at the start of 2015), it's probably 10-11pm and party's almost over.

 

The "Property Chat Lead Indicator", as somebody else has termed the phrase!

 

so it seems party at brisbane is almost over

 

Nah... I think it has a while still to run. But I have no crystal ball.

 

Dont people often look for signs of gentrification like hipster cafes and skips? Or is it too late when you see signs like that?

 

I do.

But craft beer establishments are even better as their customers are not only cool, but cashed up.

One opened in Nundah yesterday.

Stones Corner has 3-4, West End and South Brisbane have loads.