Buyers market?

[scott]

What are the early signs of a buyers market?

RE agents that havent returned your call 6 months ago now "touching base "

RE ads now with labels such as reduced or motivated sellers

prices not as ambitious as 1 year ago

houses on the market for weeks rather than days

many houses passed in at auction

Any others?


Scott

 

[Aceyducey]

Scott,

Are you asking for signs that signify that the market is changing or seeking to reinforce your belief that the market has changed from these signs?

Watch your assumptions!

The market has slowed, but not halted in many places.

There's been the usual Xmas/New Year dip & people have been waiting to see what interest rates did.

There's likely to be slower growth ahead, but no real signs of a bust (increased bankrupcies, high unemployment, high interest rates, etc).

Give the market a few months to make up it's mind

Cheers,

Aceyducey

 

[Cat09Tails]

Scott,

Some further signs would be

* rising interest rates leading to local market panic;

* CG's get to such a high level that there's reduced rental returns- buyers will want to get out and not overvalue their property for sale. With increased consciousness, buyers are more aware of returns

* No CG for a continued period- RE enthusiasts will turn to shares etc

* Many more properties on the market. Check out the RE websites, go to your favourite location and check out if the no. of properties there for sale is increasing.

* Increased vacancies. Again, buyers will want to get out of a "risky" market.

* The fall of gurus- that will rattle the RE market...

Just some ideas

Cat

 

[Jacque]

Faded photos in RE windows that haven't yet got SOLD stickers on them

Agents willing to show on Sundays/days off/anytime

Media focus not on RE

 

[Cat09Tails]

Jaque- what about your local real estate agency with a big "MOTIVATED VENDOR- OFFERS ENCOURAGED!!" and what they're selling is the agency itself

Cat

 

[thefirstbruce]

- the number of pages of houses for sale for a specific suburb on www.realestate.com.au or www.ljhooker.com.au increases dramatically.

- there is a lower percentage of "under contract" "sold" signs on listings on the websites.

- the same houses are on the site for more than a week, the bad ones first, then the good ones as well.

- web listings start to drop their prices from the original listed price. I am seeing this on the outskirts of brisbane, and now into the middle suburbs.

- IP yields drop to 2-3% below interest rates.

- I have a theory that booms are fueled by investors. The behaviour of owners is much more predictable and rational.

- I have another theory that investors act as a mob (not original). They are subject to the same behavioural traits as a mob. i.e. a few of the savvy notice the fertile grounds for a boom (low interest rates, good IP yields, prices pushing up quickly in the trendy burbs, pent up demand from first home buyers, prices reasonably flat for 5 years, about 7-10 years since last boom). these guys start buying (running), then tell their mates, who start running. then the media picks up on it, and fuels those further away from the action (they start running). eventually you have critical mass when everyone is onto it (everyone is running). they drive prices up past what represents a reasonable return. by this time, the smartie pants are selling, like Steve McKnight.
Once everyone is running, the end of the boom is just a few months away.

But the thing about mobs is that those at the back stop running after the guys at the front have stopped. Hence you always have a bit of run on past when the writing is on the wall.


As an investor I like to keep fundamentals foremost. You are buying to satisfy the rental market. Therefore you must know what is happening with that. There is a ceiling on the rental market put there by wages, unemployment rates, and rental supply/demand. If you understand these, you should never pay too much for an IP.

 

[Cat09Tails]

Bruce, yeah- sometimes we sell. But buy and hold still works. I've just bought 2 IP's and will not be selling until *at least* the next cycle (7-10 years). The "smartie pants" as you call them, selling up, is good for them. But some of us will be continuing to build a portfolio. I am very happy to ride through a slump- buy and hold still... umm... holds

Cat

 

[thefirstbruce]

Cat, I like to throw a bit of timing into the time approach. It is an improvement on dollar cost averaging.

If you have been able to score some +CFs recently with good CG potential, I am impressed. Further, I think negative gearing isn't necessarily the best investment, esp if you ain't on megabucks.

Sure, you'll do well when the next boom rolls around, and you probably won't go backwards much in any one year in between. But I like to think of how many other opportunities I can make in between now and the next boom. If I can invest in other opportunities that return >20%pa. before the next boom, then i am doing better than leaving my money in IPs til then.

If i can do that, I am helping the market economy work more efficiently.

 

[L Bernham]

I also keep track of a sample of suburbs that I'm interested in on Realestate.com.au
My investigations suggest a buyers market is evident in Brisbane at least.
ie
Manly, Qld
21 Jan 51
2 feb 63

Cannon Hill
21 Jan 26
2 Feb 36

Toowong
21 Jan 149
2 Feb 163

Forest lake
21 Jan 215
2 Feb 227

Out of the 40 areas I have figures for, 37 have had the total number increase for two weeks in a row, 1 is steady and 2 are a few less.

If you look at the number of places sold in these areas, its very low.
In fact most of the above had about half as many listed during spring of last year, a time when they say a lot of people put their houses on the market.
There is fast becoming an oversupply as any migration into the state is absorbed by the plethora of new dwellings being built.

LB

 

[thefirstbruce]

Nice info LB.
I have noted the same trends in Banyo, Geebung, Aspley, and Pine Rivers.
But to be more accurate with web stats, one would have to allow for turnover. You could theoretically have high turnover on a low volume, and a low turnover on a high volume. Turnover could only be monitored by the little red "under contract" signs they overlay on a listing. The other thing is when the market is running hot, a lot of properties don't make it onto the web as the agents are happy to sell them within 36 hours of listing without wasting time putting them up on the net.

Nevertheless, all this makes me realize how powerful owning the database for realestate.com.au is. Newscorp owns 43%. I bet the guys that have the database are exploiting the trends. They must be able to chart the bubble as it works its way out from the inner city to the burbs, and then the country towns. And they'd see which Seachange spots are starting to move.
God, having access to their database, and developing the statistical analysis would be worth a fortune.

I understand ljhooker won't use it because they believe realestate.com.au will start playing monopolist games when they have most of the market wrapped up.


Thinking about realestate.com.au, it looks like it has become the Aussie market leader.

domain.com.au seems lame.

Property.com.au seems to be a launching site to other sites, but it is now owned by RPData, which could mean a big integrated future.


hmmmm, think I'll go and buy a few shares in realestate.com.au tomorrow. They have gone from 40 to 70 c since August last year. And my bet is that as the property market slows, more agents will be forced to use it. And guess who the director is? John McGrath. If he can't steer them in the right direction, who could?

 

[scott]

Aceyducey

Are you asking for signs that signify that the market is changing or seeking to reinforce your belief that the market has changed from these signs?

Both

Scott

 

[suggo]

In my opinion it doesn't really matter what sort of market it is. Buy investments based on solid principles and return and I really don't think you can lose.
There are people about who seem to think that everyone just ran about buying willy nilly in the last couple of years, THIS IS NOT TRUE! Those who investigate and do their due dilligence on each property and allow for a slowing, even decline in the market as well as higher interest rates will be sitting pretty in the long run. If you are trying to make money from real estate in the short term (<3yrs) then I am not really sure what sort of approach you should take. In my opinion doing that it becomes more a matter of timing than a matter of time. This concept again seems to elude some of those that are very vocal on this froum.

All I hope is that you keep an open mind and look at things for what they actually are and not be bullied into a certain line of thinking.

 

[Aceyducey]

Ditto with Suggo

The secret in any market is to research & buy smart.

To use a share market example....do you make money when shares are going up or going down?

The correct answer is both...in fact you can make more money faster when they are going down.

Some people don't recognise that when more people stop looking for property & there are more properties listed that equals more opportunities for people who research & buy smart.

Cheers,

Aceyducey

 

[thefirstbruce]

"Buy investments based on solid principles and return and I really don't think you can lose. "

suggo, that's the whole point. buy based on return. many of us don't have the capacity to negatively gear ad infinitum, esp with interest rates climbing. At the moment it is extremely difficult to get a good return.


My opinion is that buying a property yielding a 3% net yield is not a good investment. There are many other opportunities out there where you can park your money for a year to wait for the market to soften further.

 

[astroboy]

Originally posted by thefirstbruce
[BMy opinion is that buying a property yielding a 3% net yield is not a good investment. [/B]

Can't agree with this, too sweeping a generalisation. It DEPENDS on the property.
Still making money money on yields lower than this. Want details. .... sorry I won't do it. But some property is worth holding regardless of the crappy yield.
ab

 

[L Bernham]

Ditto too with suggo.

Just as long as the fundamentals used are realistic, you shouldnt go wrong.

Interesting comments FirstBruce.
Valid points you gave for buying Realestate.com.au. I can't see a property "correction" affecting them at all. Whether its moving up or down there will always be a property market and agents will always need to advertise.

I think I posted some time ago that the annual results were out soon. I was told yesterday that they won't be released for another 2 weeks. I don't know what the hold up is. (probably allowing all the insiders to buy before the news comes out )

I have often thought about the value of the database at RE.com . With minimum effort they can see how many properties are selling, how many are being advertised in each area, average time to sell, median price, etc. Its amazing they havent come out with their own forecasts based on real time data.

I keep track of a fair bit of info on it such as new listings each week, number of rentals available vs number of properties for sale vs number sold and enjoy watching the trends develop in areas of interest. Pretty time consuming though.

LB

 

[thefirstbruce]

"But some property is worth holding regardless of the crappy yield."

that's if you can keep servicing the debt with rising interest rates while waiting for CG. prices at the moment make that very difficult for most.

I would agree with your statement in some respects. i.e. if I buy a 10 acre property on the outskirts of a major city, with one house on it, the yield sucks, but the land value is only going one way. Does this make it a good investment? everything is relative, relative to what else you can put your money into, and how much you want to sacrifice current lifestyle via neg gearing while waiting for CG. . a lot of families have been talked into buying IPs without considering the impact of higher interest rates.

You have to look at both sides of the argument ab.

Personally, i think it is a better strategy to throw a bit of timing into the time strategy.

 

[astroboy]

Originally posted by thefirstbruce
Personally, i think it is a better strategy to throw a bit of timing into the time strategy.

Couldn't agree more, though it never ceases to amaze me the potential in particular properties that most people just can't see.
Often they don't entail *long* term holds with crappy yields.
Sometimes you just need to think outside the square (and I know that sounds cliche-ish)
astro

 

[Aceyducey]

Originally posted by thefirstbruce
that's if you can keep servicing the debt with rising interest rates while waiting for CG. prices at the moment make that very difficult for most.

TFB,

Don't forget that property is an asset you CONTROL.

There are many different ways to create your own CG.....

Renovation, replacement, sub-division, repurposing, etc

You may even be able to flip it quickly for a few bucks

Cheers,

Aceyducey

 

[Mr Turkey]

The time to buy is when people sell for tax losses.

Mr Turkey