Where is Australia in the property cycle based on Consumer sentiments?

Hi PC,

Background

I'm reading Value Investing In Property by the late Gavin McPherson. His buying strategy centres around investment grade properties close to CBD's in major capital cities with influx of population.

Consumer Sentiment

Chapter 22 - Timing to Buy, Gavin talks about religiously checking the Consumer Sentiments graph (vs number of dwelling sales as proxy for level of buyer demand):

"I try and purchase at the end of a long spell of bad consumer sentiment ... I buy when prices are low, which allows me more property with less competition - at a cheaper price. I check this graph religiously. You should too."​

100 means people are equally optimistic and pessimistic. Lower the number the more pessimistic consumer sentiment is (and per Gavin's theory, the lower the buyer demand).

The graph shows a downward trend to 92 (of 100) with forecasts continuing to go downward. Consumer sentiment was at a 5 year high in July 2018 (106) before trending down to the current 92.

Three questions re: is now a good time in the property cycle to buy:

1. Which of the measures would best correlate to good time to buy homes? Best one I found was 'Home loans' which has a strong correlation with consumer sentiment.

2. If I am understanding Gavin's theory correctly. His view would be to hold out and do nothing until the Consumer Sentiment bottoms out and then has a small pick-up?

3. Is there something similar at a state level?

Thanks for any insights. Eager to learn!

 

What did it show in 2012? And did it show different figures for sydney and perth?

 

Start of 2012 was about 95, rising to peak of about 111 in early 2013.

Housing price index for period is similar (95 to 111) and quite well correlated.
How does that compare to what happened in the housing prices?

It only shows for each country. I don't know if there is a publicly available state based index.

I did find this: https://www.westpac.com.au/content/...-research/er20191009BullConsumerSentiment.pdf

Westpac: Not surprisingly, the state detail on price expectations is the mirror image of the picture from assessments of ‘time to buy’ with the biggest gains over the last two months again coming in NSW (+12.5%) and Vic (+16.6%). More consumers nationally now expect prices to rise than fall – the first ‘net positive’ consensus since mid-2018​

 

tell that to people who bought in perth.

 

Using broad stats for the entire country to then base investment decisions off is insanity to me.

 

Does it make a difference if he only buys in top 6 cities and close to the CBD?

1. Sydney
2. Melbourne
3. Brisbane
4. Perth
5. Adelaide
6. Gold Coast

Acknowledged. Hence looking to get access to state based figures to see how it compares.

 

Imho yes it matters alot. They are completely different markets , even broadly speaking.

I don't know how others like to do their DD but I like to use an outside/in approach.

Look at state cycles, choose a state, then look at cities, choose a city, then suburbs, streets, dwellings.