Wednesday, December 05, 2012

What my Crystal Ball says...


Back in 1986 when the real estate market was shocking - interest rates were double digit, unemployment rates were double digit and completed empty spec homes were everywhere, I would get asked all the time “…when do you think things will improve?”. For about a year, I was like a broken record saying over and over again... "I don't have a crystal ball!"

Well finally I purchased one. It wasn't cheap either. It still takes pride of place in my office all these years later. Let me assure you though, even with my trusty old, top of the range crystal ball, I am unsure what is happening in the market right at the moment.

Conflicting signs are everywhere. Last weekend we sold one property nearly 20% over reserve with a fast and furious competitive auction, then the next property we had just one bid, and well under its true worth.

The key drivers are great. Unemployment is modest (currently 5.4% across Australia), we have record low interest rates (the RBA dropped official cash rates by 0.25% to 3% this week), and there is a shortage of available property with no oversupply at all. Prices are modest and affordability has improved significantly - it should be booming!

My tip…if we haven't hit the bottom, we are close. I feel the market will bounce around for a couple of years with quality properties in hot demand. This will lead the market into the next cycle.

Buyers will continue to demand good value, yet will be happy to pay a premium for a special property.

RP Data have predicted next year will see a housing rally, and they see the bottom end now feeding into the market, which will soon produce a flow on effect.

Consumer confidence is the key. The stage is set; all we need now is a good dose of consumer optimism and confidence.

If you think you can pick the bottom of the market you are better than me, but the feel out there is certainly more animated. Spring just got better and better which is not typical and may be a sign of the change arriving. There certainly seems to be a positive mood swing in the wind…

It "feels" like we have bottomed now, but you are all welcome to try your luck with my crystal ball.

As for me, I don't worry about it any more. It is what it is, and frankly there are just as many advantages if it does stay tougher than there is in the boom, as we covered last week.

Just relax and enjoy your selling and buying.

Regards,
Anthony Toop

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