Is It time to buy real estate? Making Sense of the Market 2017

February 01, 2017
Alan Heath

Is it time to buy Real Estate?

Hindsight is a wonderful thing, but it isn’t much help when trying to anticipate the best time to buy Real Estate. That said, by analyzing past data it is possible to expose telling trends and cycles. And right now, the trend is your friend.

Let’s take a closer look into three particularly interesting and current trends:

  • Trend 1: When interest rate goes down, house price goes up
  • Trend 2: Sydney Median House Price rises at 7% per annum
  • Trend 3: Brisbane Median House follows closely behind Sydney Median House Price 

Trend 1: When interest rate goes down house price goes up. 

Competing forces are at work with interest rates and there is evidence we are at a significant turning point.

 In early 2016, as inflation fell and the Australian economy slowed, the Reserve Bank cut official interest rates twice, catching (some) people by surprise. The truism that “when rates go down house price goes up” could not have been better demonstrated in Australia’s most expensive market – Sydney, where house price which had paused has kicked up strongly!!

To see where house price is headed in 2017, we need to look at where interest rates are headed. The Australian p1 Jan 26 2017 stated that “low inflation has eliminated the chance of rate rises this year”. A proven reliable source, Bill Evans, Westpac’s Chief Economist, expects the Reserve Bank to stay firmly on the sidelines this year with no change predicted. He does however expect bank funding costs to rise by 0.3% this year. (Westpac Weekly Update Jan 23 2017). This is significant – Westpac are predicting rates will rise (by a small amount) this year.

 There are other players now in the rate equation – APRA and ASIC – both are government regulators with specific roles inside the financial system. (for a more info on their roles and effect, read my blog “What should I do about rate in 2017”)

 2017 could well prove to be the turning point in the (Sydney) property market.

 If rates to consumers trend up that means Sydney property price may well flatten and even turn down. Many people thought that in Sep 2015 and were proved wrong, but this time there is much more political sentiment encouraging a pause for Sydney house price.

 The message here: All signs suggest we are nearing, if not already at the turning point of the current cycle. If you were looking to ‘wait and see’ the bottom of the market, then wait no more!

 

 Trend 2: Sydney Median House Price rises at 7% per annum

Has Sydney house price gone too far? Opinions don’t matter – only numbers matter. And numbers show that by even the most conservative trend – Sydney Median House Price has been rising at 7% over the last 30 years.

 Look back to 1998 and 2002 when Sydney Median House Price “overshot” the trend. FOR EVERY YEAR THAT HOUSE PRICE OVERSHOOTS TREND, there is a year down the track that it must pause for.

 Fact - in Sep 2015 Sydney Median House Price overshot the trend. Fact – Sydney Median House Price has now overshot the trend by MORE in the current cycle.

 In my opinion, this means that Sydney Median House Price will now take a pause sometime soon. This upward trend cannot continue forever – it just doesn’t work like that.

 The message here: Buy in Sydney if you are going to hold long term until the next cycle – but don’t buy in Sydney to make a quick gain – as the saying goes – “that boat has already sailed”.

 

Trend 3: Brisbane Median House Price follows but lags Sydney Median House Price

Certainly, one of the most topical trends of the moment is the confident up-rise of Brisbane Median House Price. Interestingly this is equally true at the moment in … Gold Coast, Canberra, Hobart and Adelaide as well. (Domain Quarterly House Price Report Dec 2016)

 Our Sydney clients buying in Brisbane at the moment are doing so confidently, and either at or above asking price. They’ve seen this trend before…

Brisbane clients however, are experiencing frustration at not having their lower than asking price offers accepted and consequently are taking several attempts before being successful.  

 The market where you can offer low and wait to hear back from the agent to negotiate has GONE.

Look back at 2002 when this has happened before. Sydney house price swiftly rose, then stalled, and Brisbane (suddenly looking more affordable) eventually then caught up.

It is happening again right now - the numbers speak for themselves.

The message here: Buy now in Brisbane (Gold Coast, Canberra, Hobart and Adelaide) and capitalize on an upswing…  The trend is your friend.  

 

As always, you can call of email me anytime, it's what I'm here for.. 0411 601 459

Posted in: News

Contact us today.


Additional Comments? * :