I saw the sign… 08/10/12

Do you realise it’s been about 5 years since the GFC came along and smashed world economies and destroyed bank accounts, decimating share portfolios and property prices along the way like some rampant Godzilla type monster? The fact is though, it wasn’t as if we didn’t see this coming. The GFC , not Godzilla. The signs were there yet we chose to ignore them. I’m just as guilty as the next guy here and even though things were progressing at a somewhat unsustainable rate I chose to believe the growth was going to remain linear (straight line) instead of the way it actually was, exponential, where things ramp up closer to the end. Oops. Guess I should have been looking for the large green lizard breathing fire on top of the building.

So 5 years ago we ignored the signs of a fall in the property market, and we fell. It wasn’t as massive as some predicted but a dip none the less. Here we are 5 years later and the question I want to pose today is, “what are the signs saying at the moment”? Having been to a number of first quarter financial year presentations late last month, I was intrigued with the data and reactions of people in our game. So I did a little asking around myself and the feedback was interesting. Take a look at what I found.

Good Properties sell:

Yep, it appears that if you have a quality property in the right location, then there is a better than even chance you will get what you expect for it. Granted your expectations are not what they were in 2006, but you will get decent money for it. The feedback from some of the agents I talked to is that the good ones are getting competitive activity at auction. Places that are overpriced or “less than quality” still struggle, but the good ones go. Having been beaten on three occasions over the last 8 weeks by what I considered to be overpriced bids on properties I was targeting for clients tends to confirm this for me.

Clearance rates are up:

65%-66% in the Victorian market this week versus 55%-58% a few months ago. Now before you start to tell me that winter slowed things down and that it’s the spring Season, if a bargain is to be had on a blisteringly cold July day, then I’m getting out of bed to go and bid. I am sure the warmer weather prompts a little more action, but we are talking near 10% here. What makes this stat interesting is the next point.

Stock levels are down:

Speaking to a few agents in my local area last week led me to the conclusion that listing is starting to become a little difficult. In fact September in the inner North was about as bad as it’s been in memory for new listings at some of the bigger agencies. These guys I speak to are pretty good at what they do, and if they tell me listings are down, then it seems less people are looking to, or more importantly need to sell.

Lenders are becoming more creative:

RAMS have just started a new push around lending flexibility. It’s now less about what your interest rate is and more about whether you can get a loan. Their marketing talks about 97% LVR’s, 5% deposits, using 6 months consistent rental as demonstrated savings and discipline, and loans targeted at the self employed, investors and refinancing. These are all loans that the larger lenders have kept at a distance over the last few years. Apparently they are beginning to creep back in. No doubt due to the competition in the lending sector.

So what’s all this mean? If you were into crystal ball gazing and reading signs it might go a little like this: Less properties are being listed, so competition is a little higher. The higher the competition the greater the chance of a result at auction, as you don’t want to miss out on one. The better the place offered at auction then the more you have to bid because the good ones don’t come up as often. You can get the money, even up to 97%, as the banks are looking to get as much market share as they can at the moment because fewer loans are being listed because there are fewer transactions.

So we are talking more competition, less restriction on getting the money and a greater chance of things selling. Remind you of any time, say, about 6 years ago? I’m not saying Godzilla is dead here guys, nor am I saying things have turned around, all I’m saying is that if you ignored the signs of the crash first time around, learn from it. I still subscribe to a softly softly approach, but as this market begins to pick up I have every intention of staying ahead of the wave. The trick as always, is in not getting too far ahead, and that’s all about being able to read the signs. As always negotiate hard, but fair. Have fun and buy well.

Garry McPherson

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