Is Market Sentiment Changing

[MTR]

With all the recent budget news, job losses etc. I wonder whether we will see changes in the property market. I certainly see this in the Perth market, certain pockets are now starting to slow down. Its not all negative, some pockets are still rising, but its time to tread lightly IMO.

Market sentiment is huge and when we start to hear negative reports this creates fear this is a big one for property investors.

I personally think it is time to be cautious when buying. As a developer I am only buying in areas where there is still demand and also mitigating the risk by offloading at least 50% of the stock. Not bullet proof by any means but as long as I don't end up with negative cash flow I will continue to move slowly.

What are your thoughts? Here are S McKnight's summary on this which I think is pretty much spot on.

http://www.propertyinvesting.com/co...0099eab9a72def211346edceff4dc02fbdbe1fad20d72

 

[eyespy]

For Sydney, i have a noticed a slowdown during easter and May, but then things seem to have bounced back lately. Am watching prices to see what is happening in the coming weeks. But from a retail perspective, things seem a lot quieter since the budget.

 

[Dazz]

With all the recent budget news, job losses etc. I wonder whether we will see changes in the property market.

To me, it seems like an ideal time to purchase property.

 

[INVSTOR]

I'm expecting next financial year my expenses will rise quite a bit so I'm now budgeting to spend less on next PpOR.
Where I am selling seems undervalued and experienced little growth but prices are just starting to move up and I think it will continue in the short term.
Where I am buying (which is at a much higher price point) has had some good growth in the last year and certainly slowing and declining in price.
I think the suburbs with median price will hold up. More expensive suburbs $700,000 - $1,000,000 could slow down. May be a different story again though when WA stamp duty changes 1st July for FHB. I'm expecting less momentum.

 

[INVSTOR]

Interesting read, slow-down in May. http://theage.domain.com.au/real-estate-news/property-prices-head-south-20140602-39d2z.html

 

[see_change]

Then we have clearance rates at 79 % for sydney ..

This graph shows gradually increasing clearance rates over the last few weeks

http://apm.domain.com.au/Research/AuctionResults/

Went to an auction on Friday . Hot competition for the properties under 1.5 and apart from one 3 mill plus property which didn't get a bid , everything else either sold at what we thought they should go for , or one property which had , IMHO , an optimistic vendor .

Certainly no sign of prices coming down from what I see

Cliff

 

[RetireRich101]

Then we have clearance rates at 79 % for sydney ..

Certainly no sign of prices coming down from what I see

Cliff

A colleague of mine looking for houses in Sydney's Killara. He showed me a house, a corner block with a fair house. Not in a better pockets of Killara. My Colleague's being in the PPoR hunting for sometime in the area, so knows price pretty well.
He thought it would fetch for $1.3m, but it got sold $1.6m

 

[see_change]

A colleague of mine looking for houses in Sydney's Killara. He showed me a house, a corner block with a fair house. Not in a better pockets of Killara. My Colleague's being in the PPoR hunting for sometime in the area, so knows price pretty well.
He thought it would fetch for $1.3m, but it got sold $1.6m

The lower end is still hot ... 1.3 mill for a house is lower end .

Seeing the increasing clearance rates on the graph I linked , I'm wondering if the last couple of months of relative sanity is just the market catching its breath as it has adjusted to the increase over the last year . I'd love to see another 10 % in the next nine months .

Cliff

 

[Aaron Sice]

Agree MTR.

Well placed property still doing well, average product in a suburb is starting to sit.

Doesnt help with agents deluding themselves that its a year ago, still.

 

[kamchatsky]

I have had 2 separate developers (one small one, and one is the biggest one around) offering me reduced price OTP units for sale for last month. All of them in Sydney area. One of them was originally going to sell them in stages, but instead decided to sell the whole lot in 1 hit. Looks like the developers are offloading as many OTPs as they can.

Of course, even with reduced prices, they were way too expensive at the first place. It is like they jack the prices up, then have a "sale" to entice buyers. With the OTP units in Sydney as expensive as houses I just cannot see buying them at the moment.

 

[dex]

engagement rings and economics

Don's comment got a lot of thumbs up. When people can't trust those who govern it causes instability so people sit on their hands.

===

The federal budget has sent real shock waves through our communities. Many believe the drivers to policy decision are ideology rather than economics. In some cases I see no evidence to the contrary. The current administration reminds us that everything is up for grabs.
.
A global backflip now means every promise is soured and this is where the panic or lack of confidence has its roots.
.
If you catch a partner in a lie you are unlikely to rush out an buy an engagement ring. As a student of economics it reminds me of a second year classroom exercise. This is really what this data tells us. Liers can?t be trusted and once you start questioning then analysis paralysis sets in. No decisions will be made. In the same way people will stop pulling the trigger on major purchases like housing and in particular investment property.
.
However, the good news is just like relationships one bad experience does not usually put people off. Once the trust is back people will buy again.

 

[dexx]

Perths southern suburbs (Canning Vale) has slowed greatly since March. Stock has increased 50% and prices have dropped 5%.

 

[Ausprop]

different story in mandurah, stock has evaporated. strong sales in south west - to be expected when nothing decent was built for 7 years! anything new and quality is snapped up. western suburbs going strong

 

[Kent Cliffe]

In Perth the Market between $400k and $550k is still hot due to the changes in the FHOG bringing forward demand. After the 1st of July the market will slow a little in this price point due to the demand.

Development sites in Perth are still strong with the market priced ones moving within a couple of weeks. I notice that a lot of Buyers are paying uneconomical prices for sites where the land cost is sub $1m.

The commercial market has slowed with industrial being the strong performer due to cap rate compression which is a consequence of cheap money. Office is still horrid and we all know retail is doing it tough.

Where I would be putting my money in Perth...

I have suggested a bit of a switch strategy to insulate against any market risk with the premise of buying predominantly land value with some value add potential. Ideally, this too is purchase in areas off a low base and low supply. The high land value combined with the low supply react less to poorer market conditions and the value adding allows you to manufacture some growth. Long term Perth is still an out performer.

 

[Deltaberry]

Market too hot for my liking.

 

[bumskins]

Then we have clearance rates at 79 % for sydney ..

This graph shows gradually increasing clearance rates over the last few weeks

http://apm.domain.com.au/Research/AuctionResults/

Cliff

I believe last week was a 79% headline clearance rate too before being revised down to 75% once more sales information came in.

Clearance rates are down from the start of the year. There was a big dip in clearance rates in April with all the low volume weekends/all the public holidays. So they aren't really trending up as much as they are resettling after this period.
Another couple of weeks or confirmation of the weekends clearance rates will confirm which way clearance rates are moving.

Something interesting I haven't read too much about, is the impact that changes to UNI fees & HELP Loan Interest Rates might have on borrowing capacity of graduates going forward. Assuming those budget measures go ahead. People could finish University with 'pretty' substantial debts that will also climb at a faster rate, god forbid not finding a job straight away or being stuck on a lower salary for a while.

 

[MTR]

In Perth the Market between $400k and $550k is still hot due to the changes in the FHOG bringing forward demand. After the 1st of July the market will slow a little in this price point due to the demand.

Development sites in Perth are still strong with the market priced ones moving within a couple of weeks. I notice that a lot of Buyers are paying uneconomical prices for sites where the land cost is sub $1m.

The commercial market has slowed with industrial being the strong performer due to cap rate compression which is a consequence of cheap money. Office is still horrid and we all know retail is doing it tough.

Where I would be putting my money in Perth...

I have suggested a bit of a switch strategy to insulate against any market risk with the premise of buying predominantly land value with some value add potential. Ideally, this too is purchase in areas off a low base and low supply. The high land value combined with the low supply react less to poorer market conditions and the value adding allows you to manufacture some growth. Long term Perth is still an out performer.

Hi Ken

Low base, low supply is good but very competitive.

Settling on property this month which has low supply, not low base not Spearwood/Hammy Hill.

The only way of securing a development site in this area I believe is prior to hitting the market. Interesting thing is it continues to rise, I think at least $10K per month, crazy stuff, but then again if surrounding areas are $200K higher then I believe a winner. I think important to look at surrounding area (values) all the time.

Back to point, tightly held areas and low base would be good, but if you can afford higher entry level areas you will perhaps make more money as end value is much higher, build remains the same, if its a development site that is.

I too hope Perth continues to be a winner

 

[MTR]

Market too hot for my liking.

Are you talking inner city blue chip Melb? resi

 

[see_change]

I believe last week was a 79% headline clearance rate too before being revised down to 75% once more sales information came in.

Clearance rates are down from the start of the year. There was a big dip in clearance rates in April with all the low volume weekends/all the public holidays. So they aren't really trending up as much as they are resettling after this period.
Another couple of weeks or confirmation of the weekends clearance rates will confirm which way clearance rates are moving.

.

It will be interesting to see what happens in the next few weeks . We're watching our target market very closely as we're planning on selling our PPOR Within the next year .

A month ago I was more concerned as the agents were talking about more property coming on the market and there was talk about decreasing clearances . Well properties came on the market and most have already sold and during this period ( last four weeks ) there has been an increasing clearance rate. ( I'm not talking about the decrease from above 80 % prior to that ) .

Certainly , in our segment of interest , I'm not seeing a fall in prices from " expectations " though there was a period , probably in march where some sales where highly contested and people were paying " over expectations " .

I may be wrong , but I think that once people mov on from the budget hysteria ( we have a short media cycle ) any short blip in confidence will go start moving on . If there is any further sign of a weakening economy I would not be surprised to see the RBA drop rates and then the market will surge again ......

Ooooo... Ok every one

After me , chant

The market is crashing
The market is crashing
The market is crashing ....

RBA , are you listening ......

Cliff

 

[MTR]

How low can IR go??? From what I have been reading wont be any rises this year or next, drop I really don't know, perhaps to help the Aussie $ fall, as still historical high at 92-93, help manufacturers.