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Trying to pick the market? There is never a market equilibrium
Victor Kumar

Trying to pick the market? There is never a market equilibrium

finance-advice
1 minute read

Trying to pick the market? There is never a market equilibrium

August 19, 2019

When it comes to property markets, there is usually never a perfect equilibrium. In fact, there might be a few surprises in store from the property market before the year is out. 

What I mean is there is usually an oversupply or undersupply stock situation, such as too many new units being built.

In the finance sector, the same goes, with lending either constricted or overflowing.

Both of these factors have an impact on buyer and investor sentiment, but also the sentiment of vendors and selling agents, too.

Plus, there are seasonal factors to consider, such as winter, which is usually a period of slower market conditions.

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Of course, this is purely psychological because the time of year should have no impact on market activity.

Also, there is the tax season when investors in particular are waiting on insights from their accountants to better understand their numbers and whether they can afford to buy another property for their portfolio.

Changing times

So, it stands to reason, that July is usually a lower listings month because it’s the dead of winter and not many people want to buy or sell.

However, new SQM Research has highlighted that the number of listings, while still seasonally low, have reduced significantly from the same period last year in some locations.

In fact, according to the research, year-on-year Sydney’s listings declined by 10.5 per cent, Darwin declined by 4.8 per cent and PerthPerth, TAS Perth, WA by 2.6 per cent.

One of the reasons why this could be happening is that some vendors still have their heads in the property clouds and aren’t prepared to list their properties until prices mystically go back to the levels that they were a few years ago.

Also, because of lower interest rates, more people are able to hold on to their properties rather than selling because of cash flow problems.

Going back to my original statement, though, currently there is an imbalance of buyers in my opinion.

That’s because many were stuck on the sidelines as they couldn’t secure finance until the serviceability calculations were reduced recently.

Some of them now have the “fever” and are just buying any old thing, while the smart ones are being strategic with their property purchases.

The first state of play is where bidding wars take place, which is starting to happen more and more at auctions.

Another sign of the market changing can be evidenced through my regular attendance at housing commission auctions in a suburb of Sydney.

Over the past four months, attendance has gone from being half-full to standing room only.

Plus, the sale prices of those properties have skyrocketed from about $388,000 to $476,000 in the space of a few short months.

Another sign of market change is that the volume of listings with no price guides or advertised as “offers over” are also on the rise because sellers and agents recognise the equilibrium is starting to swing back in their favour.

However, it’s not there yet.

In fact, I believe we are now in a unique position that will see, by year’s end, the pendulum swing significantly back towards sellers.    

Many fundamentals are pointing towards stronger market conditions next year due to higher government spending on infrastructure, lower interest rates as well as incentives such as the first home buyer deposit scheme, which are all aimed at stimulating our economy.

That’s why the equilibrium is still on the side of buyers, even though listings aren’t exactly flush.

Within six months, though, the number of buyers will have supercharged, and they will be competing against each other to purchase property – regardless of its quality.

In essence, the market is currently in a sweet spot between market feast and famine.

The smartest investors won’t delay before making their move. 

Victor Kumar, Right Property Group

About the author

Victor Kumar

Victor Kumar

Victor Kumar is the author of 'Supercharge your Property Portfolio' and the founding director of Right Property Group.

Victor and his wife came to Australia from Fiji in 1997 with just $4,500 in their pockets. They worked hard as radiographers but realised this was not the way to prosperity. Victor embarked on a process of building wealth through property. He has amassed a substantial property portfolio, and is still actively buying and renovating property. His recommendations are based on what works in today’s market, not what used to be effective a year or more ago.

Victor’s experience, finance background, and financial planning qualifications mean he is well equipped to negotiate with banks – helping them find ways to say “Yes”. He has also invested significant time and money in learning from other property investment experts and knows how to make a portfolio work.

Of course, Victor has made a few mistakes along the way but these have made him wiser – and he’ll let you learn from his mistakes so you don’t need to make them. His goal is to help you achieve your financial goals by sharing his extensive knowledge about financial structures and investment property.

Victor is now sought after as a keynote speaker at several property investment seminars and is acknowledged by his peers as an expert in the industry.

http://www.rightpropertygroup.com.au/

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