My analysis of that article, and I choose to have a "glass half full" view. Is the news all bad? let's see:
1. It is an article in a mainstream newspaper, so let's keep that in the forefront of our minds.
2. Housing construction declined and demand for loans fell 23% in the 4 months to the end of May. There still is construction, and there are still home loans being written - just the volume has dropped off. No surprise there with 12 interest rate rises in a row, and now the CBA and St,G have risen theirs again independently of the RBA. Just in my suburb of Dromana there is still PLENTY of construction going on. Lots of old beachouses being pulled down to make way for townhouses. This may cause an over-supply, which will send developers broke as they have to off-load them cheaply, but this is nothing new and is an opportunity for cashed-up buyers who can get finance. The signs are that this won't happen, as our population in the area is still on the increase now that we are within commuter distance to Melb, the Eastlink has opened up adding to appeal, and it's near the beach etc. This is only one small area, but it's not under Mr. Edwards "Sydney-myopic" view.
3. Consumer level is 51%, so there are still approx half the consumers who are still positive. This stat is interesting, because in my opinion anyone who is in the top 10% of wealth (90% are poor) have an abundance mindset. I wonder where they do their surveys; probably at the local Mall where most 10%ers don't hang out. For example; I bet they didn't conduct the survey at the Royal Sydney Golf Club or Yacht Club.
4. Mr. Edwards said "To see an adjustment going on a wholesale basis across the whole of the nation is incredibly unusual''. Another blanket statement, and I'm sure there will be at least a dozen SS forumites who are experiencing growth of some sort in their portfolio right now. This is a hallmark of an experienced investor - to be able to identify markets/properties that outperform the market.
5. Median house price down 1.05% in June. Another broad and sweeping stat that can be skewed by a spike of sales in one particular price range. For example; if the rates are higher, then there will be less really expensive houses being sold - more cheaper/more affordable houses are sold. This drops the median.
6. Some of the more wealthy suburbs are being hit. As we all know, many of these types of houses are purchased by high income professionals, not necessarily financially educated (eg:doctors are renowned for this), and buy expensive houses that take up a large chunk of their income. If they lose their job, or are over-extended and rates rise too far, they are forced to sell, and these price-point homes will have a much smaller pool of buyers, so the result is/can be a stressed sale at a lower price.
7. "We are finding the market is very price-sensitive but, if you can justify the value, buyers will part with their money,'' she said. You can still sell your house if it is good value.
8. Small improvements returning to the market in 2009. So, this means that the market is flat? and will commence growth again in 6 months or so. Hardly a collapse, and again - his view is wide and sweeping. He is assuming that all areas are going backwards. I know of 3 areas where this is not happening.
9. Sydney rents rose 15.29% for the first 6 months of the year. There is no sign of the rental market softening soon, and if I can be broad and sweeping; rents all across Aus are going up nicely.
So, the summary of all this is:
Don't pay attention to broad statements that only focus on one area. The majority of major newspapers will only focus on their little patch, and many have a "Sydney is the centre of the Aussie Universe" mindset, aimed at headlines and the sheeple masses...the 90%. The 10% are out there digging in the dirt to find the diamonds.
In general, housing is flat, with less buyer activity, but well positioned and well priced houses are still selling if you have to sell. Unless you have to; don't sell. For the 90% of homeowners who don't need to offload their property, there is no problem.
A well positioned, good quality and good condition average house in most average suburbs will still sell at a good price, and in many areas there is still some growth, but of course it has slowed down. No surprise there.
The bright side is that if you are about to enter the market, you will be able to buy some cheap housing in some areas, with rent returns remaining strong and continuing to rise in the short term, so cashflow investors (like me) will be rubbing their hands together.
If you are already in the market and have selected properties as described above, your property value will remain steady, and your rent will continue to increase.
Rather than bail out into cash, reduce debt and hold tight, and keep a close eye on the market for some good value properties.
Even if we go into a recession and unemployment rises, there will still be people who need to live somewhere. The buyers will disappear if this happens, and there will be even more pressure on rents.
Make sure you are investing to maximise cashflow when you buy next, and you will be well placed to take advantage of the next growth phase. A double win.
