In our Gold Coast Property Report in January I talked about "the turning point".
The turning point of course refers to when a market changes direction. There is no question that 2008 was a price correction year which in simple terms means that prices reduced from their peak point in the latter parts of 2007.
But, that doesn't happen for an indefinite period of time and at some point the market turns and some of the fundamentals that I have talked about previously become more predominant.
So, what are the points to watch to identify that the market is switching from price correction to price growth and therefore switching from a buyer's market to either a more balanced market between buyers and sellers or indeed a seller's market?
First up is interest rates. They're a basic tool used by the Reserve Bank to either slow a real estate market or accelerate it. There were 12 interest rate rises over 5 years leading up to March 2008, a strategy by the Reserve Bank to slow inflation which involved slowing real estate.
However, there has been a dramatic turnaround with the largest fall in history in interest rates over a 6 month period and this is clearly one of the signals that the real estate market is at a turning point.
The second is the tracking of consumer confidence which does vary from month to month, but saw rises in consumer confidence through the months of October, November and December riding on the back of falling interest rates and falling petrol prices. The index for "now is the right time to buy" is up some 39%.
The third is reducing stock levels. A sign that the market is a buyer's market is when there is a lot of property for sale and of course not many buyers. A sign that this is changing is when there is not a lot of property available.
If you looked at the Gold Coast Bulletin through January of 2008 you would have seen that the average pages advertised were some 240. This is compared to January 2009 which has just passed where the average was around 180 pages - a 25% decline in the number of properties advertised for sale. Clearly a sign of a tightening market.
The sign to detect a turning market is buyer activity. I guess that is hard for the average person to truly read, but if you can compare the number of people at open houses say mid-way through 2008 to today you will see that the number of buyer inspections is up over 70%. Enquiries on the internet and bidder registrations at auctions are also up by over 100% and finance approvals are also on the way up.
Our office has seen sales increasing noticeably each month since interest rates started falling and so, it is not hard to see a fall in the number of properties for sale and the rising number of buyers only means that price falls will be checked.
So, it is no surprise to us that auctions are getting the best results because most buyers turn their attention to auction properties in the understanding that serious sellers follow the auction method to sell their properties. They don't want to wait 6 – 12 months to sell them - they want them sold in a reasonably quick timeframe and therefore buyers are drawn to auction properties.
Whilst we understand that our sale of 12 out of 13 properties at auction just a week ago is the best auction result in Australia in over 14 months and can be attributed perhaps to the fact that we are Ray White's No.1 auction office in Australia and more skillful at this process, but clearly the results do indicate a lot more buyers are out in the marketplace.
The signs are there and those who delay in moving to secure properties in this current market will have missed out on the best buying opportunities.
Kind regards,
Andrew P. Bell
Chief Executive Officer
