With an REIV 66% clearance rate, every real estate agent, commentator and data analyst is espousing the fact that the market has turned. Claims of suburbs monthly and quarterly medians going up are heralding the revival of massive capital growths for all properties. You have got to be kidding!
I noticed one reporting company talking about certain suburbs out performing others when looking at a quarterly median price movement. Median prices are extremely useful to analyse when you have large amounts of data. Annual changes to a suburb where there have been sales of 100 properties or more consistently over many years or decades and you are not looking at a sample but all the sales, is a very good way to evaluate suburb growth or decline.
However, many analysts are now looking at changes in price over 30, 60 and 90 day periods and even then only a sample of the total sales. In a market where there is not an even mix of owner occupiers and investors and when the data relies on voluntary reported sales not government data collected by those who paid stamp duty, the results and corresponding analysis should be taken simply as anecdotal, not analytical. And then the data can sometimes be further skewed by analysts over thinking the movements instead of focusing on “coalface” evidence.
I was exhibiting at the Home Buyers Show at The Melbourne Exhibition Centre over the weekend and it is always quite enjoyable to talk to a lot of people who are interested in buying property. I was very surprised by the number of people who were thinking about purchasing for themselves to live in as opposed to the investors that normally make up such a large percentage of the people at these shows.
Anecdotally, this matches what we are finding in the market place. There are a lot more owner occupiers than investors. This is the biggest reason why looking at small amounts of data will not give reasonably trend advice. Owner occupiers are always looking for the best homes and will pay a little more for the privilege. This means the better houses in any particular suburb will sell a little better than they should and the lesser value, worse presented properties will not sell at all, further skewing median house trends.
As we move further in to the spring selling season and if the interest rates drop again then I foresee the balance of investors and owner occupiers rebalancing and this will in turn create a demand that the current supply will not be able to satisfy. If this is the case I can foresee a slow but solid trend up in price over the next 3 – 9 months. The main thing buyers will have to be incredibly careful of, is not to overpay the market. It will be easy for owner occupiers to get emotional and also exasperated and pay more than they should.
If you are considering a purchase this year, whether you have already found a property or are just beginning your search, please feel free to contact us for a no obligation meeting. We can assist you with a full service of search, assess and negotiate, a partial service of assess and negotiate or simply negotiate a property that you are ready to purchase.
Ian James
Director
JPP Buyer Advocates