Investors not ‘playing’ the game could miss out big

“The slowdown of new home sales at the end of 2018 was faster than we’d anticipated, but we expected that would moderate out over the course of 2019, particularly after the election,” Mr Reardon said to Smart Property Investment.

“The election also has an impact on consumer confidence, tends not to be a particularly material impact, but a very short impact on new home sales, that … the election will return to more normal activities.

“Around about that same time, we’ll start seeing house prices stablise and as soon as that happens, we’ll see another wave of investors return back into the market.”

The impact of the downturn

The good news for property investors, according to Mr Reardon, in the current market is that while the market softening was rapid towards the end of 2018, he believed it will not be particularly deep due to strong economic conditions: low unemployment levels, strong economic growth, returning wage growth and strong population growth.

“[As long as] those macro fundamentals are strong, then the depth of this downcycle won’t be very deep,” he said.

Despite this potential short-term downturn, property investors are feeling out the market to try and pick its absolute bottom, Mr Reardon said, but it is not an easy task.

“They go, ‘If we wait another month, well maybe prices will come down again,’ and it’s that game, predicting the bottom of the house price cycle is like predicting when the next earthquake comes,” he said.

The cyclical nature of property markets indicates to Mr Reardon that prices are expected to rise, and when they do, he predicts they will rise by a significant amount.

“We know house prices are going to go up again, and as soon as they start going up, they will jump, because what happens is that investors, first-home buyers, owner-occupiers: all those people that have been quiet in the market for the past 18 months; they all return to the market at the same time,” he said.

“It's a game that those that play in the property market play and it’s a question as to who will pick the market correctly. If you don’t time it perfectly, then you miss out on hitting the bottom of the cycle.”