Shellabears Blog
Nicks Property Musings
|
The reported stats and media commentary is often delayed well behind what is actually happening out there and I feel the market, in Perth at least, currently has a bit of a crouching tiger hidden dragon going on.
Current status quo: Low levels of available property reduced velocity of sales with people holding for longer. Owners aren’t able to sell, because they have nowhere to buy. This grinds the whole machine to a halt. Lack of building and completions – As Alan Kohler so eloquently put in his Sunday finance segment on the ABC couple of weeks ago. (View Alan Kohler Video Below)
Next few months: April will be a little quieter. School holidays, Easter and Anzac Day all align this year and fewer sellers will be putting their properties on the market at this time. Many go away down south or taking a well-earned breather over public holidays. Anecdotally speaking from my experience of years and years in the industry, these school holidays are typically the time where the market transitions from the Summer Selling Season to the Winter Hibernation. Much of our market goes away to the northern hemisphere from here on, and many people switch off from property. Following the holidays in April, we lead into a Federal Election. Whilst neither party is really doing anything remarkable this time which will move the dial (in particular with property), Buyers and Sellers and property owners all delay their decisions and will defer to a sitting on their hands approach. We’ll see a seasonally quieter period throughout winter where I would expect Spring to be very robust.
Some of the main factors driving property Interest rates are trending down which is positive for value growth, Rents are continuing to climb, Unemployment is still very tight – everyone that wants a job has one, Migration is still high, Building approvals are well below equilibrium, Building costs are continuing to grow which is putting pressure on established property prices and replacement values
In the last 12 months we’ve seen a slow down at the top end and a significant growth in the entry level properties. It’s been a real bottom up push in values which I put down to affordability both in terms of rental demand being very high and investors preferring smaller ‘bite sized’ properties as opposed to more eggs in the one basket. The top end of the market has been squeezed and slowed from Cost of Living pressures with banks not being so liberal and open with their lending. Tighter lending, availability of credit and affordability has certainly impacted the higher price points.
So what? How does this affect me?
Upsizers – be ready to go – it’s very competitive out there! Have your finance lined up. If applicable, know what your property is worth and prepare it for sale so when you find the right property to buy you can go straight into your sale.
Downsizers – supply of the types of property you are after is few and far between. Preparedness is key, whether that be ready to sell your property to pay for the next one or financing in the short term.
Investors – getting the right structures in place, not over leveraging and make sure you have capacity to ride the volatility of the market. Given what’s happened in the broader economy, many are looking at property as a Safe Harbour where there’s a tangible, relatively inelastic, hard asset which pays a weekly dividend!
First Home Buyers – timing the market is impossibly difficult. Whilst supply is tight, focus on what you are looking to achieve. Love where you live and focus on the excitement of getting into your own home!
Having said all that, there’s still some good properties coming to the market – check them out below! Be prepared and be decisive.
Nick Holt
